(Bloomberg) -- India’s ambition to build up its defense industry through a $250 billion program has sent shares of a state-owned metalmaker rocketing just days after a lukewarm trading debut.
Mishra Dhatu Nigam Ltd., which makes specialty steel and is the country’s only producer of titanium alloys used in aerospace, has seen its market value surge 88 percent to 32 billion rupees ($490 million) since its April 4 listing. The stock jumped by the 10 percent limit to 169.1 rupees on Thursday after the company said it signed two non-binding agreements during the Defence Expo in India held last week.
“The company is a conduit for India’s defense manufacturing plan,” said Sanjiv Bhasin, executive vice president at India Infoline Ltd. “The materials it is into are doing extremely well globally. I see more outperformance,” he said, forecasting a target of 175-180 rupees.
India’s demand for the specialty steel and titanium alloy was estimated at about 83,500 metric tons in 2016, with usage expected to grow at 4 percent annually over the next four years, Prabhudas Lilladher Pvt. said in a note last month. A surge in metal prices in London, sparked by U.S. sanctions on Russia’s United Co. Rusal, is providing a boost to sentiment for producers, said Goutam Chakraborty, an analyst at Emkay Global Financial Services Ltd.
There’s also a technical factor supporting the share surge: low floating stock. About three quarters of the company’s share capital is held by the government, data on the BSE Ltd.’s Web site show.
“The equity base is small, so even small purchases can move the stock to its upper limit,” Chakraborty said.
Mishra Dhatu began trading on April 4 at 86.85 rupees a share, a discount to its IPO price of 90 rupees.
“I had a buy call on the stock when it listed but it didn’t do so well,” India Infoline’s Bhasin said. “I didn’t expect it would move up so sharply.”
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