NMDC has dropped sharply in opening trades ahead of its announcement of a follow-on public offer (FPO) price.
The stock opened at Rs 405 and touched a high of Rs 418. However, it slipped 8.3% from there to touch a low of Rs 383. It is now trading with a loss of Rs 24 or 5.7%, at Rs 391. Around 133,000 shares have changed hands at the counter so far.
The iron ore mining major, NMDC’s follow-on public offer (FPO) will be one of its kind in the recent history of public issues considering that the price discovery for the offer could prove to be a difficult task for the lead managers and the government.
The market believes that the stock is expensive as it is trading at a price-to-earnings (P/E) multiple of about 52 times based on its annualised earnings (for nine months of current fiscal) of 2009-10, or about 19 times its net sales of 2008-09. Even on the basis of enterprise value (EV) to EBIDTA, it is available at 23 times, much higher than most of its peers which are trading at about 8 times.
The company has alsoplanned an expansion and has submitted a $230-million non-binding bid to buy 70 per cent stake in an Australian mine owned by Perth-based Atlas Iron.