Amidst reports that steel giants such as ArcelorMittal, POSCO, Jindal Steel and JSW Steel were preparing to bid for the steel manufacturing facility of India’s largest iron ore producer NMDC, the Ministry of Corporate Affairs (MCA) has approved the demerger of NMDC Steel from NMDC.
In a late evening communique to bourses on October 11, NMDC said it has received the orders of the MCA on Tuesday and that it was in the process of complying with the requirements as envisaged in the ministry’s order.
NMDC, the state-owned entity under the Ministry of Steel, is largely engaged in the exploration of a wide range of minerals such as iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite and beach sands, among others.
As a part of the plans towards diversification into value-added products, NMDC had floated NMDC Steel in January 2015 to engage in the manufacture and trade of stainless steel, silicon, special steel and other allied inputs.
The special purpose vehicle floated by NMDC to enter the steel business had envisaged setting up a 3-million-tons-a-year capacity Greenfield integrated steel plant at Nagarnar in Chhattisgarh involving an investment of over Rs 23,000 crore. This was part of the Government of India’s charted road map to augment the country’s steel production to 300 million tons a year by 2025.
NMDC in its vision 2025 had specified that its role would be that of a developer for steel plants and that it would invite investors to commission and operate the plants at a suitable time. Accordingly, the iron ore producer proposed a scheme to add more value to its stakeholders by demerging the steel business into a separate company and subsequently inviting investors.
The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi in October 2020 gave its in-principle approval to the demerger of the steel business from NMDC and strategic disinvestment of the steel business by selling the entire holding of the government in NMDC Steel to a strategic buyer.
At present, the Indian government holds a 60.79% equity stake in NMDC.
The scheme of demerger of NMDC Steel from NMDC was approved by the shareholders and lenders over the last few months wherein the shareholders of NMDC will get one equity share of NMDC Steel for every equity share held. The shares of NMDC Steel will get listed on the bourses subsequently.
As a part of the scheme, assets of Rs 18,650 crore and liabilities of Rs 1,602 crore will be demerged to NMDC Steel.
While the board of NMDC had approved the demerger in July 2021, the Ministry of Steel had approved the demerger of NMDC Steel in March 2022.
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