Govt may disinvest 10 percent equity in NMDC this week

The government is likely to sell its 10 per cent equity this week in iron ore miner NMDC, which could fetch the exchequer nearly Rs 6,300 crore at the current market price.

"The stake sale in NMDC would happen either on Thursday or Friday. The date and price will be finalised by the empowered group of ministers, which is expected to meet on Tuesday," a senior government official said.

The Cabinet Committee on Economic Affairs on October 25 approved disinvestment of 10 per cent government shares in NMDC, amounting to 39,64,71,600 shares of face value of Rs 1 each to investors through "Offer for the Sale" (OFS) route, also known as auction route.

The NMDC issue comes within a month after government selling its 5.58 per cent stake in Hindustan CopperBSE -1.16 % for about Rs 807 crore. NMDC issue will be the second disinvestment by the government in this fiscal.

At Friday's closing price of Rs 158.70 apiece of shares NMDC at the BSE, 10 per cent share sale would fetch a little over Rs 6,292 crore for the government, if the offer is fully subscribed.

"Unlike Hindustan Copper issue, the base price for NMDC share sale will not see steep discount and will be maximum in the range of 10 to 15 per cent," the official said.

Explaining the rationale, he said, "NMDC's book value is Rs 61.56, while its average trading price is in the range of Rs 160. Then, NMDC is a debt free company, is sitting on a cash pile of over Rs 20,000 crore and is the largest domestic iron ore miner."

At 10 to 15 per cent discounted base price, the government can collect in the range of Rs 5,000-5,500 crore.

In the last fiscal, NMDC had reported a net profit of Rs 7,265.39 crore and net sales of Rs 11,260.53 crore.

However, in the June-September quarter, its net profit was down nearly 15 per cent at Rs 1,678.62 crore largely due to fall in sales and lower production.

At present, the government holds 90-percent stake in NMDC. As of March 31, 2012, the state-owned iron ore miner had a paid-up equity capital of Rs 396.47 crore.

For the share sale, the company had appointed five merchant bankers -- Citigroup Global Markets, Goldman Sachs (India) Securities, Enam Securities, DSP Merrill Lynch and ICICI Securities -- and ALMT Legal, Advocates & Solicitors as legal advisor.