BackGovernment raises $1.1 bn in NMDC share sale
Foreign investors bid for half the NMDC offer that was the largest by the govt since a $2.5 bn auction in ONGC
Premium(Aniruddha Chowdhury/Mint)
Mumbai: India raised $1.1 billion selling a stake in miner NMDC Ltd in a fillip for its efforts to rein in a widening fiscal deficit through sales of state assets.
The government aims to secure $5.5 billion in the current fiscal year ending next March by divesting stakes in state companies, a target many economists consider to be optimistic.
Before Wednesday, it had raised just $148 million in a process hit by volatile markets and wrangling among government officials.
The share sale was the largest by the government since a $2.5 billion auction of stock in state explorer Oil and Natural Gas Corp. Ltd at the end of the previous fiscal year that required large bids from state investors.
Many economists expect India’s fiscal deficit to hit around 5.6-5.8% of gross domestic product this fiscal year, above an official target of 5.3%.
In the NMDC sale, the government offered 396.47 million shares, or 10% of its stock, at a floor price of ₹ 147, an 8% discount to Tuesday’s close.
By the close, the offer had attracted bids for 686.92 million shares at an indicative weighted average price of ₹ 149.15, exchange data showed.
“The pricing was the key," said a fund manager at a large domestic mutual fund who bid for NMDC shares and declined to be named. “This should bolster the government’s confidence that there is interest in public sector stocks at the right price."
The government, which is expected to step up its divestment programme in the months ahead, has approved share sales in top power utility NTPC Ltd, explorer Oil India Ltd, state trading firm MMTC Ltd and power equipment maker Bharat Heavy Electrical Ltd.
“The message is loud and clear—a quality asset at the right price will find a buyer," said Jagannadham Thunuguntla, equity head at SMC Global Securities.
“On the face of it, it now looks that the government should be able to meet its disinvestment target," he said, adding that upcoming share sales are in larger companies with solid fundamentals.
Foreign interest
Foreign institutional investors bid for about half of the total shares on offer, a finance ministry official said, with domestic funds making up the balance of the oversubscription.
State investors sought nearly 40% of the offer but are expected to get an allocation of about as most of their bids were at the floor price, said the official, who asked not to be named.
In two other recent government deals, state financial institutions ended up buying the bulk of the offer due to limited private sector interest.
Analysts expected the sale to generate robust demand, given what they said were attractive valuations, strong growth prospects for the company and a limited supply of traded shares.
NMDC, India’s top ore miner, accounts for about 15% of iron ore mined in the country, with annual production capacity of 30 million tonnes.
Shares in the company closed 3.3% lower at ₹ 154.30, but still at a premium to the indicative offer price. The stock has declined 4% in 2012, compared with a 25% gain in the main stock index.
Citigroup, Goldman Sachs, Bank of America Merrill Lynch and Indian investment banks ICICI Securities and Axis Capital were the bankers for the NMDC share offering. REUTERS
Sumeet Chatterjee and Abhishek Vishnoi in Mumbai and Arup Roychoudhury in New Delhi contributed to this story.
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