NMDC to buy back 800.82 million shares at Rs94 apiece

Mumbai: State-owned iron ore mining company, NMDC Ltd, on Monday said it will acquire 800.82 million shares from shareholders, including the government, as part of a buyback plan to assist the centre in its disinvestment programme for fiscal year 2017.

NMDC will acquire shares, representing 20.19% stake of the total outstanding shares in the company, for ₹ 94 apiece. The iron ore miner will have to shell out ₹ 7,527.75 crore, as per stock exchange data.

The government may garner about ₹ 6,022.20 crore, in proportion to its 80% stake in the company.

The buyback price is at an 8.02% discount to current rates.

Shares of NMDC closed on Monday at ₹ 102.20 apiece on BSE, down 0.34% from Friday’s close. The stock has touched a high of ₹ 105.50 and a low of ₹ 75.20 in the last 52 weeks, stock exchange data showed.

As per share buyback rules of Securities and Exchange Board of India (Sebi), a company will have to propose a buyback through “tender route” to enable the promoter (the government in this case) to participate in the buyback.

Moreover, the company will need board approval to buy back shares up to 10% of paid-up capital and reserves. For a buyback of up to 25% of the paid-up capital, the company will also be required to seek shareholder approval.

Mint reported on 16 May that finance minister Arun Jaitley had outlined a disinvestment strategy whereby cash-rich public sector undertakings could buy back shares which would later pave the way for the government to conduct strategic sales as market conditions improve.

Jaitley said that the markets were extremely volatile last year and the government met its fiscal deficit targets because of the revenue buoyancy. “Hopefully the markets stabilize more,” Jaitley told journalists, adding that cash-rich public sector undertakings could look at a buyback of their shares until market conditions improved.

NMDC explores iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, and beach sands among other minerals. It has about ₹ 18,486 crore in cash and cash equivalent, Bloomberg data showed.

A Mint analysis on 16 May highlighted that 34 central public sector enterprises, including NMDC, had about ₹ 1.8 trillion in cash and cash equivalent as of March 2016 end, which could be an alternative to the government raising funds via minority stake sales.

Coal India Ltd holds more than ₹ 53,000 crore in cash while Oil and Natural Gas Corp. Ltd (ONGC) and NTPC Ltd together hold about ₹ 30,500 crore, Bloomberg data showed.

The government has set a disinvestment target of ₹ 56,500 crore in 2016-17. Of this, while ₹ 36,000 crore will come from minority stake sales, ₹ 20,500 crore has been targeted from strategic stake sales.