Cabinet clears 10% disinvestment of NMDC; may get Rs 7000 crore

The government on Thursday approved 10 percent stake sale in the iron ore mining major NMDC that could fetch the exchequer over Rs 7,000 crore.

Updated: Oct 25, 2012, 19:15 PM IST

New Delhi: The government on Thursday approved 10 percent stake sale in the iron ore mining major NMDC that could fetch the exchequer over Rs 7,000 crore.

The Cabinet Committee on Economic Affairs (CCEA) has cleared sale of about 39 crore equity of NMDC of face value of Rs 1 each through the Offer for Sale (OFS) route, an official release said.

At present, the government holds 90 percent stake in the National Mineral Development Corporation (NMDC).

As of March 31, 2012, the paid up equity capital of NMDC stood at Rs 396.47 crore.

Post disinvestment through the OFS (auction) method, the government holding in the Navratna entity will come down to 80 percent.

Shares of the NMDC closed at Rs 184.40 apiece, down 0.81 percent on the BSE today. At the current market price, the proceedings would fetch around Rs 7,000 crore.

NMDC, under administrative control of the Ministry of Steel, is primarily engaged in the business of iron ore mining.

But it is also expanding its activities towards production of steel and other value added products. It is India's largest producer of iron ore, operating two mining complexes in Chhattisgarh and one in Karnataka.

Although the government had earlier proposed stake sale in NMDC, it postponed the decision because of poor market conditions.

The government plans to raise Rs 30,000 crore from disinvestment during the current financial year. However, it has not been able to come out with any public issue during the first six months of the fiscal.

Due to uncertain market conditions, the government in the last fiscal could raise only Rs 14,000 crore from disinvestment against the target of Rs 40,000 crore.

The CCEA has also given authorisation in favour of EGoM to change the method of disinvestment from the OFS method, if the same is required subsequently due to market conditions or due to change in SEBI Rules and Regulations, etc.

Besides, floor price, number of tranches, basis of allotment and number of shares to be allotted in each of the tranches will be decided by the EGoM, it said.

The EGoM may also accept or cancel the offer, if there is not enough demand at or above the floor price; in case of over-subscription in one or more tranches, the EGoM can decide whether the over-subscribed amount is to be retained subject to the overall disinvestment of 10 percent, it said.

The statement said allotment of additional shares to eligible and willing employees can be offered at a discount of 5 percent to the issue or discovered (lowest cut off) price up to a maximum of 0.50 percent of the paid up equity capital subsequent to completion of the transaction under OFS.

The method and procedure of allotment of shares to the employees will be worked out in consultations with merchant Bankers or Advisors to the issue, it said.