IPO Note

MOIL Ltd. (MOIL) SUBSCRIBE

Issue Details Company Snapshot

Listing NSE & BSE
MOIL Limited (MOIL), a Miniratna public sector unit, incorporated in
Offer Open date 26th Nov 2010
1896, is India’s largest producer of manganese ore by volume. The
Offer Close date 30th Nov 2010 company has access to 21.9 million tonnes of proved and probable
Promoter GoI reserves and a total of 69.5 million tonnes of inferred indicated mineral
Price Band 340-375 resources out of the total domestic manganese resources of 378.6
Industry Mining million tonnes. It derives 51.5% of its revenue from top 10 customers
Website: www.moil.nic.in with Maharashtra Elektrosmelt Ltd and Bhilai Steel plant accounting for
22.1% revenue share.
Equity shares prior to
16.8
issue(Cr) MOIL operates 10 mines located in the Nagpur and Bhandara district of
Shares offered (Cr) 3.4 Maharashtra and in the Balaghat district of Madhya Pradesh. Out of
Equity shares post which 7 mines are underground and 3 mines are open cast mines. The
16.8
Issue (Cr) company is engaged in the production of manganese ore and other
Pre Post value added products like Electrolytic Manganese Dioxide (EMD) and
Shareholding
Issue Issue Ferro Manganese.
100.0 80.0
Promoters Key Investment Highlights
Public 0.0 20.0
Favorable demand- supply scenario
Total 100.0 100.0
On the back of a 9.2% CAGR in the domestic steel consumption
Financial Snapshot demand for Managanese is expected to more than double from 2.4 mt
to ~ 5 mt by FY12. Approximately 90% of the Manganese ore is used in
Rs in crore 6mFY11 FY10
steel production and with India being a net importer of manganese, the
635.1 company is well placed to benefit from the demand supply mismatch.
Revenues 969.4

EBIDTA 508.1 732.1 Largest producer of Manganese ore; high reserve base

Other Income 61.4 129.9 MOIL is the largest producer of Manganese Ore in India (516,749
tonnes for H2FY11) and accounts for almost 50% of India’s total
production. It has access to significant resources and reserves and
PBT 494.7 706.8
55% of its proved and proven resources have average manganese
content of 40% or higher, 27.5% of its proved and proven resources
PAT 330.7 466.3
have average manganese content of 36-39.9%. This combines
favorably with the Indian manganese reserves, 51% of which are of low
Investors are advised to read the risk or mixed grade.
factors & more detailed information in
the prospectus before investing in the Eyeing Overseas Acquisitions to expand resource base
issue
With the limited manganese reserves in the country and on the back of
growing steel demand, MOIL is all set to expand its resource base.
MOIL along with NMDC, India's largest iron ore producer, is exploring
opportunities in South Africa, Congo & Turkey to expand its resource
base. Besides manganese, MOIL is also diversifying its product
portfolio and eyeing nickel & chromite properties abroad.

-1- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
IPO Note
MOIL Ore Reserve Summary
Mines Proved Probable Total

Ukwa 1381863 1458382 2840245

Balaghat 6967053 2073343 9040396
Chikla 556343 616690 1173033
Tirodi 167937 798385 966322
Sitapatore & Sukli 0 0 0
MOIL has access to 21.98 million tonnes of Dongri Buzurg 3012751 0 3012751
proved and probable resources. Beldongri 231100 7151 238251
Munsar 113722 1172020 1285742
Kandri 379532 0 379532
Gumgaon 1623059 1623059
Dumps 1427900 1427900
Total 15861260 6125971 21987231

Low cost of mining and huge cash reserves make for compelling
financials

MOIL is a low cost producer of managanese with the average cost of

mining of Rs 2058 per tonne. Its debt free capital structure with cash
reserves of Rs 17,629 million provides it sufficient resources to fund its
expansion and acquisition plans, support the working capital
requirements

Value addition through increased presence in ferroalloys and

renewable energy

MOIL has entered into a joint ventures with Steel Authority of India Ltd
and Rashtriya Ispat Nigam Ltd to set up ferroalloy plants in
Chhattisgarh and Andhra Pradesh, respectively. These are collectively
expected to produce ferromanganese (with a total installed capacity of
51,000 TPA) and silico manganese (with a total installed capacity of
112,500 TPA).
MOIL also diversified into renewable energy and has set up wind farm
of 20MW capacity in the Nagda/Ratedi Hills in Madhya Pradesh for
captive power.

Robust expansion plans to increase production

The company has chalked out robust plans with a capex of Rs 84 crore
& Rs. 107.7 crore for FY11 and FY12, respectively to expand its
production capacity and has undertaken extensive initiatives such as
formation of Joint Ventures, expansion of resource base and
optimization of capacity utilization. It has already spent Rs 241.8 million
st
as on 31 Oct 2010.
-2- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
IPO Note
Estimated Estimated
Actual/Estimated Potential Benefit of the
Projects Capital Cost Completion
Commencement Date Project
(in Rs crores) Date
Deepening
Production Shaft at 6.51 Jun-07 Dec-10
Balaghat Mine
Deepening Holm's
To increase the ROM
Shaft at Balaghat 19 Mar-11 Mar-15
production from 340,000
Mine
T to 475000 T
High Speed shaft for Issued work to a subsidiary of
mining at deeper Coal India Limited for
300 2016
levels at Balaghat preparation of techno-
Mine economic feasibility report
Issued work to a subsidiary of
Sinking of vertical To increase the ROM
Coal India Limited for
shaft at Gumgaon 16.01 Apr-11 production from 60,000 T
preparation of techno-
Mine to 100,000 T
economic feasibility report
To increase ROM
Sinking of vertical
25.2 May-10 Apr-14 production from 30,000T
shaft at Munsar Mine
to 60,000T
To increase ROM
Sinking of vertical Finalization of work order in the
18.11 Apr-14 production from 55,000T
shaft at Ukwa Mine process
to 100,000T
Development of To increase ROM
Dongri Buzurg 180 Mar-11 Mar-14 production from
opencast mine 350,000T to 560,000T
To build up infrastructure
Township at Mines 203 Entered Letters of Interest 2014-15
at mines

Key Concerns

Overdependence on a few customers

For FY2010, 51.5% of MOIL’s revenue is represented by its top ten

customers. Maharashtra Elektrosmelt Limited and Bhilai Steel Plant,
subsidiaries of SAIL together accounted for 22.1% of the company’s
manganese ore sales revenue in FY10. If it fails to enter in new
agreements with these key customers it would adversely affect its
revenue.

Seven out of ten mines are underground

The company operates seven underground mines. Underground mines

are hazardous and involve inherent risks and have higher cost of
production than open cast mines. MOIL is a preferred player due to its
low cost production and any increase in production costs from
underground mines would adversely affect the business.

Industry Overview

Manganese is the fourth most used metal after iron, aluminium and
copper. Over 90% of the world’s production of manganese is utilized in
the desulphurization and strengthening of steel. Manganese ore is also

-3- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
IPO Note
used to produce manganese ferroalloys (such as ferromanganese and
silico manganese), which are used in steel-alloying applications.

Manganese as a raw material is used in different industries. The

different alloys of Manganese are HCFeMN (Used in normal and carbon
steel production), SiMN (Used in compound steel making) and Refined
(Used in Stainless steel, heat resistant steel production).

Overview of the Global Manganese Ore Industry

As of CY-09, Land-based total manganese reserves in the world are

placed at 5,200 million tonnes, of which South Africa alone accounts for
more than 75%, distantly followed by the Ukraine (10%), Australia and
India (3%) each. China and Brazil account for about 2% and 1%
respectively.

Overview of the Indian Manganese Ore Industry

Total resources of manganese ore in India are placed at 378.6 million

tonnes as per the United Nations Framework Classification (UNFC)
system. Out of these, 138.2 million tonnes are categorised as reserves
(150 million tonnes according to United States Geological Survey
(USGS) and the balance are in the remaining resources category.

State-wise, Orissa tops the total resources list with 40% share followed
Maharashtra and Madhya Pradesh has the by Karnataka 22%, Madhya Pradesh 16%, Maharashtra 8%, Goa 5%
best quality ore and Andhra Pradesh 4%. Rajasthan, Gujarat, Jharkhand and West
Bengal together shared about 5% of the total resources.
Manganese ore mining in India is carried out by both the opencast as
well as underground methods. Of the 126 mines, eight are underground
(three in Madhya Pradesh and five in Maharashtra). The cost of
production of underground mines is higher than opencast mines which
favorably makes India a low cost producer.

Domestic demand-supply scenario in India:

India is a net importer of Manganese Demand for manganese ore and ferro alloys has increased
considerably due to the increase in the production of steel.

A huge Demand Supply gap exists because of the slower pace in the
development of new mines as against the robust demand from the steel
industry has already pushed India in becoming a net importer of
manganese ore in the last 3 years.

The prices of Manganese ore are internationally determined and are

fixed on a quarterly basis with the contract providing for any major
escalation in the prices.

-4- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
IPO Note

Objects of the issue

The objects of the Offer are to carry out the disinvestment of equity
The Central government is divesting 10% shares by the selling Shareholders and the company would not receive
and the state government of Maharashtra the proceeds from the Offer and all proceeds shall go to the Selling
and Madhya Pradesh 5% each Shareholders.

Peer Comparison

There is no direct comparable listed peer in India with which MOIL can
be compared with and hence is compared with other mining companies.

Valuation & Recommendation

MOIL is valued at its P/BV of 3.4x and 3.7x at the lower & upper
price band respectively. The company’s RoNW stands at a
comfortable 27.8% and a competitive P/E of 12.3x and 13.5x at its
lower & upper price band, respectively, which gives a strong
signal of growth. With the company having attractive valuation, a
sustainable business model, a large resource base and traction in
demand, we recommend a SUBSCRIBE on the company for listing
gains as well as for a medium to long term horizon.

Name of the company Face Value (Rs.) EPS (Rs) RONW (%) Book Value (Rs.)
MOIL Limited 10 27.72 27.77 99.80
Sandur Manganese & Iron Ore
Ltd 10 33.3 - 244.5
NMDC 1 8.4 26.6 36.0
SESA Goa 1 23.4 36.1 94.8

-5- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
IPO Note
Restated Summary of Statement of Profit and Loss
(Rs. in crores)
Particulars
FY08 FY09 FY10
Income
Net Sales 977.5 1,293.3 969.4
Other Income 46.6 111.7 130.0
Accretion/Decretion in Stock -8.7 34.4 -11.5
Total 1,015.4 1,439.4 1,087.9
Expenditure 0.0 0.0 0.0
Ore raising and operating expenses 178.3 288.1 252.3
Manufacturing and electricity generation expenses 28.9 44.3 37.2
Administrative and selling expenses 47.6 72.2 61.5
Research and development expenses 2.8 1.7 2.9
Write offs and provisions 6.9 1.7 0.9
Expenses for diversion of forest land 0.1 0.1 0.9
Total operating expenses 264.5 408.0 355.8
PBDIT 751.0 1,031.4 732.1
Less : Depreciation -16.1 -24.7 -25.3
Less : Interest and finance charges 0.0 0.0 0.0
Add/(Less) : Prior period items 0.0 0.0 0.0
PBT 734.9 1,006.8 706.8
Total provisions for taxation 255.1 343.0 240.4
Net profit after tax 479.8 663.8 466.3
Extraordinary items (Net of tax) 0.0 0.0 0.0
Net profit after tax and extraordinary items 479.8 663.8 466.3
Adjustments on account of - 0.0 0.0 0.0
Changes in accounting policies -4.7 2.1 -0.1
Prior period items 0.0 0.0 0.0
Other adjustments 32.9 -44.9 3.5
Tax impact 0.0 0.0 0.0
Current year tax impact -10.9 16.4 -1.2
Deferred tax liability/asset 1.3 0.0 0.0
Tax impact - other adjustments -0.3 0.0 -1.5
Total adjustments after tax impact 18.3 -26.5 0.7
Profit after tax, as restated 461.6 690.3 465.6

-6- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
IPO Note
Restated Summary of Assets and Liabilities
(Rs. in crores)
Particulars
FY08 FY09 FY10
Fixed assets
Gross block 302.5 342.0 357.0
Less : Depreciation 113.6 136.4 160.5
Net block 188.9 205.6 196.5
Capital work in progress 8.6 15.5 22.2
Total fixed assets 197.4 221.1 218.7
Investments 0.0 0.1 0.2
Current assets, loans and advances
Inventories 23.5 57.1 46.4
Sundry debtors 158.9 61.1 85.7
Cash and bank balances 608.6 1,232.2 1,487.1
Other current assets 21.5 54.1 59.8
Loans and advances 25.4 40.7 63.1
Total current assets, loans and advances 837.9 1,445.1 1,742.1
Total assets (A + B + C) 1,035.4 1,666.3 1,961.1
Liabilities and provisions
Current liabilities 133.3 183.2 145.9
Provisions 99.1 143.8 125.7
Total current liabilities and provisions 232.4 326.9 271.5
Deferred tax liabilities 16.8 18.5 12.8
Total liabilities 249.1 345.4 284.3
Net worth (A + B + C - E) 786.3 1,320.9 1,676.7
Represented by :
Share capital 28.0 28.0 168.0
Reserves and surplus 758.3 1,292.9 1,508.7
Total share capital plus reserves 786.3 1,320.9 1,676.7
Net worth 786.3 1,320.9 1,676.7

-7- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.
IPO Note

Ventura Securities Limited

Corporate Office: C-112/116, Bldg No. 1, Kailash Industrial Complex, Park Site, Vikhroli (W),
Mumbai – 400079
This report is neither an offer nor a solicitation to purchase or sell securities. The information and
views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for
errors of fact or opinion. Writers and contributors may be trading in or have positions in the
securities mentioned in their articles. Neither Ventura Securities Limited nor any of the
contributors accepts any liability arising out of the above information/articles. Reproduction in
whole or in part without written permission is prohibited. This report is for private circulation.

-9- Friday, October’ 09, 2009

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.