NMDC Ltd. has begun the process to carve out its steel unit, aiming to separately list it on the bourses, and at a time the government plans to augment the production of the alloy.
The board of directors of India’s largest iron ore miner, at its meeting held on July 13, has approved the “scheme of arrangement for demerger” between NMDC and NMDC Steel Ltd., according to an exchange filing.
That’s subject to necessary statutory approvals including at the Securities and Exchange Board of India, Ministry of Corporate Affairs, Government of India, and respective shareholders and creditors, if any, of each of the companies involved in the scheme.
The entire share capital of NMDC Steel held by NMDC would be cancelled and new equity shares of NMDC Steel would be issued to all shareholders of NMDC in the same proportion.
NMDC Steel will issue 293 crore shares to the shareholders of NMDC against equal number of shares they hold in the miner.
NMDC will not undergo any change in shareholding pattern because of the scheme.
NMDC Steel’s shareholding pattern will mirror that of NMDC as a result of the effectiveness of the scheme.
NMDC has incurred a capital expenditure of Rs 17,000 crore for the 3-million-tonne-per-annum integrated steel plant in Nagarnar, Chhattisgarh. The state-owned miner in August last year had approved its demerger.
In October 2020, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, gave its ‘in-principle’ approval to the demerger and strategic disinvestment of NMDC Steel by selling entire Government of India stake in the mill Steel to a strategic buyer.
NMDC, according to the filing, is considering the proposed scheme to add more value to company’s stakeholders by demerging the steel plant into a separate company and subsequently inviting an investor.
That, Vishal Chandak, senior vice-president at DAM Capital Advisors Ltd., said implies that “NMDC would not be commissioning the plant without the strategic investor being on-boarded and we prefer it that way”.
According to JPMorgan, a successful demerger would be positive for NMDC as it would reduce cash support from NMDC. The company was expecting a capex of Rs 3,700 crore in FY22, of which steel plant capex expected to be worth Rs 1,500 crore.
Shares of NMDC closed 5.22% higher before the demerger announcement on Tuesday, compared with a 0.76% gain in the Nifty 50