MOIL gains 9.35% on purchase of mine land

Mumbai: MOIL surged 9.35% to Rs 284.75 after the company said it has acquired land adjacent to its Balaghat mine in Madhya Pradesh. Analysts said the mine purchase would boost capacity and drive revenues. MOIL currently operates seven underground mines and three opencast mines, making it the largest iron ore company in India and fifth-largest in the world.

“MOIL is a phenomenal story in the making,“ said G Chokkalingam, founder, Equinomics Research & Advisory (the analyst owns stake in this company). “The company has got cash of over Rs 2,800 crore. Even after the buyback, it will still have free cash of around Rs 2,000 crore." Chokkalingam explained that this would be about 50% of the market cap post the buyback at the current market price.

MOIL has said that it would buy back up to 3.48 crore shares representing 20.72% stake at a price of Rs 248 for an aggregate consideration not exceeding Rs 863.34 crore.

“Metal prices are improving globally and the company has increased prices twice in the last two months,“ said Chokkalingam.“Further, it has also increased capacity by adding three new mines.It also has an advantage as it accounts for more than 50% of the manganese market.“

However, there are others who advise investors to wait till the second half of the year is done before buying into companies such as MOIL.

“Results for the second quarter are not expected to be good because it's a lean period,“ said an analyst from a domestic brokerage on the condition of anonymity.