NMDC board approves demerger of NMDC Steel
Premium- The board of directors of the country's largest iron ore miner approved the ‘scheme of arrangement for demerger’ between NMDC and NMDC Steel
State-owned miner National Mineral Development Corporation or NMDC Ltd. has kickstarted the process to carve out its steel unit, aiming to list it separately on the bourses, even as the government plans to augment production, to take advantage of the high metal prices.
The board of directors of the country's largest iron ore miner, on Tuesday approved the “scheme of arrangement for demerger" between NMDC and NMDC Steel Ltd., according to a regulatory filing.
"The Demerged Undertaking would be vested with NMDC Steel Limited pursuant to the demerger. The entire share capital of the NMDC Steel Limited held by the NMDC Limited would be cancel led and new equity shares of NMDC Steel Limited (in a manner as elucidated in the Scheme) would be issued to all the shareholders of NMDC Limited in the same proportion," NMDC said in an exchange filing.
The scheme, however, is subject to necessary statutory and regulatory approvals, including the approval of the Securities and Exchange Board of India (Sebi), stock exchanges, the Union ministry of corporate affairs as well as respective shareholders and creditors.
NMDC Ltd, is a government-owned company and is engaged in the exploration of a wide range of minerals. NMDC Steel Ltd is a wholly-owned subsidiary of NMDC Ltd and at present does not have any business operations.
NMDC shares rose over 3.80% at ₹172.05 per share on BSE on Tuesday after the demerger announcement.
In October 2020, the Cabinet Committee on Economic Affairs gave its in-principle approval to the demerger and strategic disinvestment of NMDC Steel by selling the entire Government of India stake in the mill Steel to a strategic buyer.
The Government of India has planned to augment India's steel production to 300 million tonnes per annum (MTPA) by 2025. To fulfill the same, green-field steel plants are being promoted through Special Purpose Vehicles (SPVs) in mineral-rich states of Chhattisgarh, Jharkhand, Kamataka and Odisha.
MINT PREMIUM
See All
An SPV being set up at these states would act as a facilitator and developer for the steel plant, including the acquisition of land, obtaining statutory clearances for setting up the plant, organizing resources including water & power allocation among others. On completion of these activities, the SPV would invite for suitable investor/s, who would construct, develop and operate the steel plant.
NMDC is setting up a 3 MTPA capacity greenfield integrated steel plant i.e. NISP (NMDC Iron & Steel Plant) at Nagamar, located 16 km from Jagdalpur in Chhattisgarh state. The decision to construct the NISP was taken keeping in view with linkage with iron ore reserves and availability of investable surplus.
Last week the government offloaded 4% in NMDC through an offer for sale (OFS). The government will get at least ₹3,700 crores from NMDC's share sale after institutional investors subscribed to the OFS on Day 1 on July 6. It is selling more than 219.5 million shares or a 7.49% stake in NMDC at a floor price of ₹165 apiece.
Currently, the government holds a 68.29% stake in the company. Following the OFS, the stake will drop to 60.80%.
The share sale was part of the disinvestment program for 2021-22. The target for which has been set at ₹1.75 trillion. In May, the government garnered nearly ₹4,000 crore by divesting its holding in Axis Bank held by the Specified Undertaking of Unit Trust of India's (SUUTI).
Never miss a story! Stay connected and informed with Mint. Download our App Now!!