MMTC Why Its value is Rs.16,505

A PSU, with a face value of Rs.10 per share is quoted at an unbelievable Rs.16,505. One does a double take and there was actually a scramble to recheck the face value. Yes, it is Rs.10 per share and not Rs.100 per share.

So what gives it such a huge stock valuation? Definitely its got nothing to do with the performance. A look at the Q3FY09 performance shows that QoQ there has been an overall slip and even on a YoY despite an increase in the topline, has a lower PAT. A company with net sales of Rs.9763.57 crore posted an EBIDTA of just Rs.75.08 crore and PAT of a paltry Rs.24.91 crore. A NPM of a measly 0.26%? Incredulous! And a look at the past records also indicates that the NPM has never ever been over one percent for any of the quarters. 99% of the topline is eaten away, always by the operating expenses.

The reason for the surge in the share price is most obviously the low or rather non-existent floating stock. The Govt holds 99.33% stake and if that was not enough, mutual funds hold 0.64%. Does that really leave anything much for the public And this explains the unbelievable price and the wide fluctuations usually seen in the stock.

The Govt is perennially talking about divestment of its stake and raising money. So what is the point in holding such stocks or rather, what is the meaning of divesting just a token of the shares, just for the sake of divestment? There is tremendous value which can be unlocked by the Govt and unless it divests its stake, the price will remain at such incredulous heights and will continue to show volatility. thanks