NALCO OFS: A Strong Proposition
Priyanka Kumari / 15 Mar 2013
National Aluminium Company (NALCO) has come up with an OFS that is on for today, March 15. The government, which holds 92.5% stake in the company, intends to raise approximately Rs 1030.80 core through this offer.
After RCF’s offer for sale (OFS) on March 8, 2013, National Aluminium Company (NALCO) has now come up with an OFS. The company is offering 25.77 crore equity shares of face value Rs 5, representing 10% of the paid-up equity share capital. The OFS will start at 9:15 am and close at 3:30 pm on March 15, 2013. The Indian government, which is the promoter, holds 92.5% stake in the company. The government intends to raise approximately Rs 1030.80 core through this offer.
NALCO mainly operates in three segments, viz. chemicals, aluminium and electricity. Its product list includes aluminium ingots, sows, cast strips, alloy wire, rods, etc. The company’s production units include bauxite mines, an alumina refinery, a smelter and a captive power plant. It has also rolled out product plant and port facilities for exporting alumina and importing caustic soda.
The company has several projects in hand, including stream in alumina refinery project, a captive power plant project, together with an investment of Rs 7270 crore. Both of these are in Odisha, and are likely to be completed by CY 2016-2017.
NALCO posted a strong financial performance in December ended quarter of FY13. Its topline grew to Rs 1693 crore in Q3FY13 from Rs 1449 crore in the similar period in FY12, and the bottomline grew by 132% to Rs 119 crore in the same period. Interestingly, the company's operating profit margin and net profit margin were both boosted by 762 basis points and 349 basis points respectively on a YoY basis.
On the valuations front, NALCO is currently trading at a PE of 18.09x its EPS of Rs 2.45. The floor price for this offering is set at Rs 40 per share, which is at a 10% discount to its market price of Rs 44 (closing as on March 14, 2013).
At present, the Indian economy is on a recovery path and we are especially bullish on the metals segment. Moreover, NALCO has posted a strong performance in Q3FY13. The government is likely to come up with many new projects in the coming future, which are likely to increase the demand for aluminum. Also note that NALCO is a debt-free company. Further, the offer price is at a 10% discount, which makes it a rewarding option. Hence, we recommend that our readers to buy this scrip.
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