The Promoter (Government of India), proposes to sell 24,03,96,572 equity shares
of face value of Rs10 each representing 5.8% of the total paid up equity share
capital of the company. SAIL has fixed the OFS floor price at Rs63 per share (at a
1.4% discount to its closing price as on March 21, 2013). We expect SAIL operational and financial
performance to remain weak during FY2014 due to its: 1) inability to
maintain/raise sales volumes amidst slower steel demand in India; 2) higher fixed
costs, and 3) delays/cost overruns in its brownfield expansion projects. SAIL is on
the verge of expanding its saleable steel production capacity from 12.5mn tonne
to 24.0mn tonne by FY2015. However, we believe that there is still time to play
the volume growth story of SAIL. Moreover, it is expensively valued at the
offer-for-sale (OFS) floor price of Rs63 (7.2x FY2015E EV/EBITDA). Hence, we
recommend investors to Avoid subscribing to SAIL OFS.

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