Monnet Ispat bounces back

Monnet Ispat is one of the beleaguered 12 companies named by RBI and understandably, the stock price was beaten down on the day the news broke. There was panic created on the TV media, urging people to get out. But even on the day that RBI named it, our Editor SP Tulsian went out on TV and asked people to actually look at the stock anew and buy as an investor.

The stock price was breaching the LC since 19^th June but since yesterday, the stock has turned around is at UC – yesterday it breached the UC at Rs.27.50 and today at Rs.36.10.

Justifying his stance, SP Tulsian has said in our Market Whispers column, “Monnet Ispat is learnt to be one amongst 12 companies, identified by RBI for NPA resolution or eventual reference to Insolvency. As stated by us repeatedly, we feel that 12 such companies are due for early resolution of NPA, either by the same Promoter or seen to have lot of take over interest from new Promoters, because of NPV seen higher than EV or revival prospects are seen in the respective companies. We will try to cover 1 such company in this section everyday, making an effort to present a practical scenario of NPA resolution and its effect on stock price.

He added, “Monnet Ispat, losely called as "Dirty Dozen" by electronic Media, is having 1.5 MTPA integrated Steel Plant at Raipur and Raigarh , with over Rs.5K crores seen in Capital Work In Progress, with allotment of Coal and Iron Ore mines or linkages, as also, having 35% stake in Orissa Sponge, is seen a High Risk High Return Stock. Joint Lenders have invoked SDR on 22-08-15 and subscribed to 51% of equity of the company, at Rs.34.20 per share, while lenders are empowered to bring in a new promoter in the company under SDR and hence may take the company to Insolvency as a matter of formality, but may bring in a potential acquirer, as many are seen lined up to acquire these pricey assets . Debt of the Company is seen at close to Rs.11,500 crores, which can get settled, if a new and sound promoter comes in. NPV of all the assets are seen estimated at over Rs.13K crores, while current M cap of the stock is at Rs.710 crores, making estimated EV of the company at less than Rs.8K crores, if loans are settled at around Rs.7,500 crores, which is most likely. It is rumoured that JSW Steel is keen to acquire the company, having submitted the bid to lenders, and going by the statement of JSW Steel MD & Group CEO, who gave estimated cost of Rs.3,000 crores, for Brownfield expansion of 1 Million tonne of a Steel plant, indicates its NPV of over Rs.10K crores, as any potential acquirer will always be seen estimating it on the lower side.”

Based on this logic, Mr.Tulsian has said, “ Going by these estimates, company can get valued at Rs.11K crore plus, due to its integrated nature and raw material linkages seen in place, where estimated cost is seen even now at $1 million for 1 Million tonne Steel plant. Once a new promoter like JSW Steel comes in, stock will get sharply re-rated, while all the negatives projected by Media, seen having already factored in, due to which, stock has not corrected below Rs.30. Share has seen informed buying in last 1 hour yesterday, while there is very low float now, with Lenders holding 51%, Promoters 25% , and 17% by institutions and HNIs, with public float seen at less than Rs.50 crores.”

His call on the stock, “ Share ruling at Rs.35.50 can move to Rs. 37.50 in 1 month and Rs. 39.50 in next 3 months, while stock is capable to give a gain of 100% as well in the next 1 year, if a new promoter like JSW Steel comes in , which is most likely. Buy as an investor.”