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Orissa Minerals Development Company:PSU under Ministry of Steel


Orissa Minerals Development Company, incorporated in the year 1918, is one of the oldest iron ore mining companies. It is part of the Bird group of companies under the administrative control of the Ministry of Steel, Government of India. The Bisra Stone Lime Company, Karanpura Development Company, Scott & Saxby, Eastern Investments, Burrakur Coal Company (under liquidation), and Borrea Coal Company (under liquidation) are other group companies.

Apart from mining and marketing of iron ore, the company is engaged in the field of mining and marketing of manganese ore. The company has six mining leases in the Keonjhar district of Orissa. With respect to the Bagiaburu iron ore mines (21.52 hectares) and Bhadrasai iron and manganese mines (998.7 hectares), the lease period is valid upto Sep. 30, 2010. Renewal is pending regarding the remaining four leases. A 100 TPD sponge iron plant has been set up and measures taken to enhance crushing capacity by installing and commissioning an additional crushing and screening plant.

The Government extends financial support in the areas of development of mines, clearing outstanding dues, creating facilities for sizing iron ore and replacement of old and worn out equipment and providing new equipment. A joint venture (JV) in the name and style of East India Minerals is in place with a 26% stake. The JV was set up for production of sponge grade iron ore and has a crushing and screening plant of 1 million MT capacity. The company has entered into direct exports of iron ore fines and earns good amount of foreign exchange.


Interesting Facts which investors should know:
 

 1)  HUGE CASH RESERVE OF 792 CRORES.

 2)  HUGE MINERAL RESERVES OF 204 MN TONNES OF IRON ORE AND 44 MN TONNES  OF  MANGANESE ORE .

 3) HIGHEST DIVIDEND OF RS 455 / SHARE & 372 / SHARE ON PAID UP RS 10 STOCK @ 4550% & @ 3722% FOR YEAR 2008-09 & YEAR 2007-08 RESPECTIVELY

Future Plans:

i) COMPANY PLANS BONUS ISSUE AND STOCK SPILT, THIS IS REQUIRED TO ENLARGE EQUITY AND LIST AT NSE
ii) RENEWAL OF MINING LEASE – IN PROCESS INCREASE IN MINING OPERATION WILL RESULT IN INCREASE IN SALES VOLUME VIS A VIS PAT AND EPS
iii) FINANCIALS & MANAGEMENT OUTLOOK – VERY POSITIVE – MANAGEMENT 5 YEAR PLAN IS VERY ROBOUST EVEN IF IT ACHIEVE 50% OF ITS PLAN, THE SHAREHOLDERS WILL BE BENEFITED

VALUATION:

1) Market Cap of OMDC is 1/10th of its peers (taking into its huge reserve).

2) EV/TONNE OF IRON ORE RESERVES - (Rs in Crore) - OMDC -160, NMDC -833, SESA –   
   661, GMDC-345
3) BOOK VALUE RATIO = CMP/BOOK VALUE – OMDC =5, NMDC =11
Ambiguity on Valuation:
Someone was referring on the message board that OMDC may touch a Lac and someone was referring it may touch only sixteen thousand Both the views are accepted If there is economy turmoil and iron ore price falls sharply we may expect the share to touch it book value (The probably is definitely present but it’s very low, if we get such opportunity we should grab the same) On the other hand, if the company operates as per its plan than we can expects the share price to touch sky high


One thing is clear that now the government wants to explore OMDC mineral resources to cater the need to iron and steel industry RINL was after OMDC for last 8-10 years.Finally it has taken over OMDC through EIL If we speak 20-30 years back, OMDC was only worth few pennies (as it was not operational) But, with change in management outlook, economy scenario and recent happenings it valuation is coming in light First listed in CSE (October ‘09), then RINL taking over OMDC (In March ’10), then listing in BSE (August ’10) and finally in NSE (September ’10) speaks its growth story :

3) SMALL CAPITAL BASE OF ONLY 6 LAKHS SHARES ONLY 1 lakh 56 thousand (26%) FLOATING SHARES