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Price discovery major problem for MMTC sell-off

Price discovery major problem for MMTC sell-off
PTI
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First Published: Wed, Aug 31 2011. 04 39 PM IST
Updated: Wed, Aug 31 2011. 04 39 PM IST
New Delhi: Discovering the true value of MMTC share in the wake of low trading volume in the market is proving to be a Herculean’s task for the government, which plans to disinvest about 10% of its stake in the trading giant.
Though the MMTC share is listed in the market, its liquidity is negligible with only 13,000 scrips changing hands on an average trading day.
The share with a par value of only Rs 1, is quoted at about Rs 700. “But this does not reflect the true value since there is very thin trading,” an official said.
The MMTC public float is thin because 99.33% equity in the company is held by the government. The institutions own sizeable of the balance of the 0.67% stocks, leaving very little for the trading in the stock market.
In this backdrop, it is a big challenge for the government to arrive at the real market value, because the Rs 700 quote is nowhere near the true price, the official said.
To find a solution, the Department of Disinvestment (DoD) has sought comprehensive details from the company. “The DoD wants to do a careful and extensive data analysis of the firm,” he said.
However, the MMTC has filled up vacancies of independent directors in the Board, a key requirement for the follow-on offer. According to norms of the market regulator, Sebi, half of the board must comprise independent directors if the company has an executive chairman.
In any case, the company has been showing decline in the net profits. For the first quarter of the current fiscal, MMTC’s net profit went down by 88% to Rs 6.47 crore against Rs 55.23 crore a year ago.
Disruptions in the iron ore exports, one of its key businesses, had made a dent in the company’s bottomline.
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First Published: Wed, Aug 31 2011. 04 39 PM IST
More Topics: MMTC | Scrips | Shares | Sebi | Corporate News |