SAIL - OFS Note - Microsec

Steel Authority of India Ltd (SAIL) is the largest steel producer in India, with ~20% market share. Its current capacity of 13MTPA is vertically integrated from mines to finished steel and is spread across four plants in the mineral-rich belt of Chhattisgarh, Orissa and Jharkhand. SAIL is totally self sufficient in iron ore (captive mines).

Government of India proposes to sell 24.04 cr equity shares of face value of INR10/- each, representing 5.82% of the total equity share capital of the company. At the floor price of INR63 per share, the government will be able to raise around INR1514 cr through the issue.

We recommend a "SUBSCRIBE" to the stock at the floor price of INR63 per share. The stock is trading at attractive valuations as compared to its domestic peers, which possess an average P/E of 13.6x. We believe that risk reward is very favorable at current valuations with key triggers being company planning a capex of INR70000 cr for doubling the capacity from 13MT to 24MT of which major expansion of INR62000 cr is likely to be completed by FY14e, hike in steel prices leading to improved realizations, improvement in steel demand scenario and softening of coking coal prices.

Source : Equity Bulls

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