Kolkata: Union government-owned iron ore miner Orissa Minerals Development Co. Ltd, or OMDC, is considering a series of steps that will allow shareholders to trade their stakes on the country’s key stock exchanges, executive director Champak Banerjee said.
The firm, which is also in the middle of an ownership restructuring, will consider issuing bonus shares in the second half of the fiscal ending 31 March to raise its paid-up equity capital, Banerjee said.
OMDC, currently listed only on the Calcutta Stock Exchange (CSE), requires higher paid-up capital to qualify for the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
Even on CSE, there has been no trading in OMDC shares for 24 years. Trading restarted on 17 October, but OMDC shares still change hands infrequently. On Wednesday, there were only three trades through which 14 OMDC shares changed hands.
Shareholders have been demanding that the firm list its shares on BSE and NSE to give them an exit opportunity. As CSE doesn’t have brokers outside Kolkata anymore, it is virtually impossible to sell shares for shareholders who live elsewhere.
“I tried to sell 25 shares, but didn’t manage to,” said Pune-based Jagdish Seth, who owns 550 shares of OMDC.
The proposed bonus issue will raise OMDC’s paid-up capital from Rs60 lakh, Banerjee said. A company needs a minimum paid-up capital of Rs3 crore to be listed on BSE, and Rs10 crore for NSE.
OMDC had Rs731 crore in reserves and surplus at the end of March 2009, of which Rs718 crore was in cash. A part of this money could be taken out for allotting bonus shares to shareholders, Banerjee said.
The firm could also split its shares, in line with another key demand of shareholders, he said. This will increase the liquidity of the stock and make it more affordable.
OMDC’s shares, which currently have a face value of Rs10 each, closed on CSE on Wednesday at Rs21,800 apiece.
To fulfil another listing requirement, the Union government has finalized the appointment of three more independent directors on OMDC’s board.
It currently has one independent director. With the addition of three more, half of its board members will be independent, as required for listing on NSE and BSE.
“We will be announcing their names next week,” Banerjee said.
Following the appointment, OMDC will request BSE to allow trading in its shares under the so-called “permitted category”, or a segment of the equity market in which shares listed on regional stock exchanges can be traded.
BSE has considered allowing trading in OMDC’s shares under its permitted category twice before, but could not introduce the stock because the company did not comply with listing norms, Banerjee said.
Listing on BSE will mean a reprieve for OMDC shareholders, said Rajesh Agarwal, director of CD Equisearch Pvt. Ltd, a stockbroking firm.
“Some shareholders have held shares of OMDC through generations, and I know some are desperate to sell them,” he said. “This is great news for them.”
Listing on a bigger bourse will also mean “better price discovery” for OMDC’s shares, according to Agarwal.
Only 34% of OMDC’s 600,000 shares are widely held, or available for trading. Because of this, Agarwal said, the fair value of the company’s shares are not being discovered.
Banerjee said the management’s immediate priority was to complete the restructuring of OMDC’s ownership, through which state-owned steel company Rashtriya Ispat Nigam Ltd, or RINL, would own a 51% stake in the firm.
The Union government, along with a state-owned holding company, currently owns 48.18% of OMDC’s shares. State-owned banks and insurance firms hold around 17.5%.
The company has already obtained shareholders’ approval for the restructuring, which will include the transfer of shares from the Union government to RINL.