OIL India : Listing Strategy

OIL India is going to list on NSE and BSE on Wednesday,30th September,2009.
There was a good response from QIB and HNI segment. However, the retail segment was oversubscribed 1.76 times. The Current Grey market premium for Oil India is in the range of Rs. 50-60.

Investment Guru is of the view that the stock may list at a modest premium of Rs. 50-100 against its issue price of Rs. 1050. Though the fundamentals of the company are quite strong, it has the inherent limitations of sharing of Subsidy Burden and inadequate geographical spread which would keep a tab on its performance. Though the company has a impressive track record on On-shore drilling, it has yet to prove its expertise in off-shore segment. Read More!

Stock Review : Uttam Galva Steel

Will Mittal factor change the fortunes for Uttam Steel ?

Stock : Uttam Galva Steel

CMP : 113

Book Value: 71.04

EPS (Trailing) : 9.49

As the performance of the stock suggest, Markets had a clue about it ! Uttam steel has already risen by 83% in just One month.  The stock has more than doubled in last 3 months. So what’s the buzz !!!  Global Steel King L.N. Mittal is making a debut in India by acquiring 35% stake in Uttam Steel.

Mittal’s company Arcelor Mittal is all set to become the Co-promoter of the company. The promoters have signed an agreement to sell 5.6% stake in Uttam steel.  Arcelor Mittal will launch an open offer on September 7 to acquire balance 29.4% stake in the company. Mittal is offering a price of Rs. 120 per share for acquiring this stake.

If the offer by Mittal remains unsubscribed, the promoters would transfer further stake to Mittal so that both have equal stake in the company.


How will this deal help Uttam Steel ?

Apart from giving foothold to Arcelor Mittal in Indian Steel sector, the deal would be a facelift for Uttam steel. The association with Mittal is surely going to be big boost to the brand name of Uttam steel.

Uttam steel is set to get better availability of Raw Material. The company already sources around 50% of its raw material from Arcelor Mittal.

It will also have an opportunity to transform itself from a galvanized steel producer to a integrated Steel major. It will have access to latest technology from Arcelor Mittal and access to new product segments and geographies.


Demerger of Power Biz

Another important development is that recently  the Bombay high court has sanctioned the scheme of arrangement between Uttam steel and power and Uttam Galva Steel for the demerger of the power division of Uttam Steel and power into the company. The Scheme has got effective from 21st August,2009.

The demerger of power division will help separate listing of this entity and help shareholders to unlock the value of their investment in the company.


Current Financials

For the Year ended 31st March, 2009 company posted a top line of Rs. 4372 Crore and Net profit of 100 Crore.  Though this was a growth of  over 38% over last year, the profit were lower by 24 Crore on account of high interest outgo and higher operating costs.

Uttam steel clocked a turnover of 1073 Crore for the first quarter of the current year and a Net profit of 34.57 Crore.

Investment Guru is of the view that both the developments i.e., Acquisition of 35% stake by Arcelor Mittal @ 120 per share and Demerger of power division hold good omen for the company and would not only boost its brand image but also enable it to log a impressive growth in coming years.

Read More!