Jul 20, 2009
The First Divestment: NMDC
Update: As per current Ministry of Steel meetings, the NMDC stake sale is likely to be of 15% in which case it could easily be over Rs 2000 crores ($400m) at CMP of 375 ( $7.50) As also the ones for Adani Power, Godrej, Indiabulls Power..i think it can happen given that each will have $40-50 million from retail investors, but it requires disciplined Institutional Investors who belive the India story..anyway, this kind of volume has not been done ever before in the same year, but then this is the era of Infrastructure.
The NMDC Divestment should proceed smoothly for a 5% stake if approved. Other DRHPs filed include Godrej Properties and Indiabulls Power which may do well despite not very strong management and doubtful assets ( Godrej has most of its land bank in JVs with partners , while Indiabulls Power is moving into an unrelated field after a not so successful RE and NBFC run) for NMDC if a 5% divestment comes through it would raise around 750 crores at current market prices which already seem to be around their average 6 months value in anticipation and seem like a good starting point for the Divestment to roll.
NMDC is India’s single largest iron ore producer and exporter, presently producing about 30 million tons of iron ore from 3 fully mechanized mines viz., Bailadila Deposit-14/11C, Bailadila Deposit-5, 10/11A (Chhattisgarh State) and Donimalai Iron Ore Mines (Karnataka State) which are awarded ISO 9001-2000 certification.
NMDC has the only mechanized diamond mine in the country with a capacity of 1.00 lakh carats / annum at Panna ( Madhya Pradesh State ). The organization is under the charge of Ministry of Steel, which will continue after the divestment.
As of 31st March 2009, we had 5650 employees producing a profit of INR 6500 Crores ( $1.33 billion). It was categorized as a Navratna (Crown Jewel) in Nov 2008 in preparation for its public issue. The primary Bailadila Ore deposits are supplied to Essar, Ispat Industries and others replacing sponge iron because of their beneficial metallurgy. Others like Kudremukh and Khetri were handed over to third parties to run as independent legal entities ( public or private) the management links its fortune with that of the strong demand led growth of the Steel Industry.
The stock has recently moved from 300 to 375 on news of divestment and has also signed steel companies in Japan and Korea at a long term rate. they signed a JV with Rio Tinto in Aug 2008 to expand their exploration outside India and with South African company Kopana ke Matla for exploration in Africa/SA. The equity base of the company is Rs 396 crores ( $80 million) from a three fold bonus in FY09. NMDC also plans to own 51% of Kudremukh Iron Ore ( KIOCL) for INR 315 crores ( $63 million). NMDC paid a dividend of RS 1200 crores in FY09 ( $240 million)
NMDC is also working with Adani Power, Monnet Ispat and others to plan development of its coal fields. Interestingly, it has also announced plans for a downstream steel plant in Karnataka (10MT) and another in Chhattisgarh (3MT) according to the company MD Rana Som. At present, per capita consumption of steel in the country is 47-50 kg as against the global average of 180 kg. India exported 90 million tonnes of iron ore in 2005-06 out of which 68.5 million tonnes went to China and that exports account for about 60% of Indias iron ore production. (steelguru.com)
[Categories India Infrastructure]
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