NMDC climbs 3% ahead of share sale

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Shares of NMDC clim­bed three per cent on Tuesday after a few brokerages gave a ‘buy’ recommendation on the scrip ahead of its follow-on public offer (offer for sale) scheduled for Wednesday.

The scrip has fallen 18 per cent from its September peak (Rs 194.35) and the FPO base price of Rs 147 still stood at a discount of 7.72 per cent per cent over Tuesday’s close of Rs 159.30.

Earlier, the FPO of Hindustan Copper (HCL) was priced at 41 per cent discount to its market price. Experts believe the HCL scrip was probably overvalued pre-FPO due low public float. Total public holding in NMDC stood at 10 per cent at the end of the September quarter compared with 0.41 per cent in the case of HCL.

“A strong balance sheet, presence in sellers’ market, low cost of production, high-grade mines and long mine life make NMDC an attractive bet in our view. Valuing the stock at 5.5 times FY2014E EV/Ebitda, we recommend investors to subscribe to the issue at the upper price band of Rs 150,” said Bhavesh Chauhan and Vinay Rachh of Angel Broking.

The scrip opened positive and saw brisk buying before touching an intra-day high of Rs 164.19, (6 per cent above its previous close level). Some profit booking was seen in the afternoon session. However, the scrip managed to stay high and gain 2.94 per cent to eventually close at Rs 159.30.

Chirag Shah and Faisal Memon of Barclays upgraded the scrip to overweight from underweight with a 12-month target of Rs 173.

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