NMDC OFS: Analysts positive on NMDC’s Offer for Sale, stock can give 15-20%

Mumbai: Retail investors could consider putting money in the Offer for Sale (OFS) of public sector mining major on Wednesday. Analysts said there is scope for the stock to return 15-20% in the near-term as the sector’s prospects remain robust.

The government is selling up to 7.5% stake in NMDC. The issue, which opened on Tuesday, will invite bids exclusively from retail investors on July 7.

On Tuesday, the non-retail portion was subscribed 2.13 times with an indicative price of Rs 166.46 as against the floor price of Rs 165 per share, a discount of 5.88% to Monday’s closing price.

“NMDC’s OFS price is a good entry point for investors considering its strong business fundamentals in terms of iron ore price and demand,” said Abhijeet Bora, analyst, Sharekhan. “Also, the government’s stake sale would increase the free float for NMDC and that bodes well for a potential increase of NMDC’s weightage in MSCI Index going forward.”

NMDC shares declined 3.3% to Rs 169.45 on Tuesday. The stock is currently trading at a Price to Book (P/ B) Value — a valuation measure — of 1.72 times, which, according to analysts, is not expensive.

The government currently owns a 68.29% stake in the company. Its stake will come down to 60.8% if investors subscribe to the entire issue.

“On the back of volume growth, coupled with healthy pricing environment, we have a positive view on NMDC and value the stock at a target price of Rs 210,” said Dewang Sanghavi, analyst, .

The stock has declined 12% in the past month and 21% from the 52-week highs of Rs 213.15 hit on May 12.

For the quarter ended March 2021, NMDC reported a 30% year-on-year and 28% quarter-onquarter increase in production volume.

“At current market price, the stock is trading at 4 times the core iron ore mining business and provides an attractive dividend yield of 13%,” said Amit Murarka, analyst,

.