Biz Desk
Shares of NMDC Steel got listed on the stock exchanges BSE and NSE on Monday after the demerger of NMDC’s steel business. The stock got listed at ₹37.75 per share. The government last month had received in-principle approval from the BSE for listing of NMDC Steel Ltd (NSL).
Currently, the government holds a 60.79% stake in NSL, which is the steel manufacturing facility of India’s largest iron ore producer NMDC located in Nagarnar, Chhattisgarh.
The demerger of the steel business will reduce capital intensity and improve NMDC dividend payout ratio, Sharekhan said in a recent note. “Moreover, valuation of 3.2 times its FY2025E EV/Ebitda and 0.8 times its FY25E P/BV is attractive and the stock offers a high dividend yield of 8-9 per cent,” the brokerage said on NMDC.
The stock of iron & steel company, which opened at Rs 30.25 and later hit a low of Rs 29.05 on the BSE, saw a combined 7.5 million equity shares changing hands in the first one-hour of trades on the BSE and NSE, the exchange data shows. There were pending buy orders for over 19 million shares. In comparison, the S&P BSE Sensex was up 0.12 per cent at 61,078 at 10:14 AM.
The equity shares of NMDC Steel were listed and admitted to dealings on the exchange in the list of T group of securities. The scrip will be in Trade-for-Trade (T2T) segment for 10 trading days. In the T2T segment, each trade has to result in delivery and no intra-day netting of positions is allowed.
The board of directors of NMDC on 13 July, 2021, had approved the scheme of arrangement between the company and NMDC Steel and their respective creditors and shareholders, entailing inter-alia demerger of Nagarnar Iron & Steel Plant (NISP). Under the Scheme, the NMDC Iron & Steel Plant at Nagarnar, Chhattisgarh demerged from NMDC into NMDC Steel, a wholly-owned Subsidiary of NMDC. NMDC issued one equity share of Rs 10 each of NMDC Iron & Steel Limited for every one equity share of face value of Rs 10 each to shareholders of NMDC.
On rationale behind scheme of arrangement, NMDC in FY22 annual report said, government of India has charted a road map to augment India’s steel production to 300 MTPA by 2025. To fulfill this vision, green-field steel plants are being promoted through Special Purpose Vehicles (“SPVs”) in mineral rich states of Chhattisgarh, Jharkhand, Karnataka and Odisha. It has been envisaged that the SPV being set up at these states would act as a facilitator and developer for the steel plant. It would acquire the required land, obtain statutory clearances for setting up the plant, organize water & power allocation for the site, along with dedicated raw material supply agreement. On completion of the above activities, the SPV would invite for suitable investor/s, who would construct, develop and operate the steel plant.
As part of expansion, value addition and forward integration programme, and also in consonance with the desire of the Government of India and Government of Chattisgarh, NMDC is setting up a 3 MTPA capacity Greenfield integrated steel plant (“NMDC Iron & Steel Plant” or “NISP”) at Nagarnar, 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. NISP has progressed significantly further than the other Steel SPVs. The only difference is that NISP is being developed and constructed within NMDC Limited as opposed to being developed in an SPV.
Also, NMDC Vision 2025, whilst mentioning forward integration has specifically stated that its role would be that of a developer for steel plants and at suitable time invite investors to commission and operate the plants. NMDC is therefore considering proposed scheme to add more value to Company’s stakeholders by demerging NISP into a separate company and subsequently inviting investors.