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India Research
March 09, 2010
Company Price (Rs) Chg (%) Company Price (Rs) Chg (%)
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Please refer to important disclosures at the end of this report Sebi Registration No: INB 010996539
Market Outlook | India Research
NMDC Follow on Public offer (FPO) opens on 10th March’10 and closes on 12th March’10.
The FPO entails issue of 33.2cr equity shares priced in the band of Rs300-350. The
company will raise between Rs9,900-11,600cr depending on the cut-off price. The issue of
33cr equity share by Government of India (GoI) represents 8.38% of the total outstanding
share capital of the company. Retail Investors are entitled for a 5% discount of the issue
price. Post the issue the government holding will be around 90% of the total share capital.
The company will not receive the offer proceeds as it is a part of Government divestment
plan.
NMDC, India’s leading iron ore producer benefits from huge iron ore reserves, better
quality ore and low cost advantage. At the lower price band, NMDC is trading at 12.6x
and 9.6x FY2011E and FY2012E EV/EBITDA while at the upper band it is trading at 15.1x
and 11.5x its FY2011E and FY2012E EV/EBITDA. In comparison to Sesa Goa (only listed
domestic iron ore company), which is trading at 7.8x and 6.4x FY2011E and FY2012E
EV/EBITDA, we feel that the FPO pricing is overpriced. We recommend an Avoid on the
FPO.
Nagarjuna Construction (NCC) has secured orders aggregating to Rs1,221cr. The work
orders are spread across verticals of Road construction, turnkey electrical works and
building construction and are to be completed over a span of next 12-30months. The
Order Book of NCC stands at Rs16,600cr or 3.5x its FY2010E revenues. At the CMP of
Rs163, the stock trades at 16.4x FY2012E Earnings and 1.7x FY2012E P/BV.
We recommend an Accumulate on the Stock with a Target Price of Rs186.
Wipro Infotech, the India and West Asia IT business of Wipro Ltd, has won a turnkey
project from the Financial Intelligence Unit (FIU), ministry of finance. Wipro has been
selected through an open and stringent bidding process. The value of the deal is expected
to be just under Rs100cr. As part of the project, Wipro will implement Financial Intelligence
Network (FINnet) for FIU. The scope of services includes development of the portal, data-
warehousing, analytical application and ERP implementation, at the data centre and
disaster recovery site. The project is scheduled to be completed in 24 months in different
phases with a further service period of 36 months. FINnet will enhance the efficiency and
effectiveness in the FIUs core function of collection, analysis and dissemination of financial
information to ensure substantially higher productivity and effective monitoring in all areas
of FIUs work. The project assumes significance in the light of growing economic crimes
within the country and the government's efforts to arrest it. This win is very crucial for Wipro
in light of the IT e-governance related budget allocation done by the finance ministry for
FY2010E-11E, wherein Wipro has likelihood of winning other key projects in this space.
We maintain an Accumulate on the stock.
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