Home / Markets / Stock Markets /  NMDC shares trade ex-demerger. Should you buy?
Back

Shares of NMDC Ltd started trading ex-demerger on Thursday, a day ahead of the record date for the company's demerger of the steel business that was fixed as Friday, October 28, 2022, for the purpose of identification of shareholders of the demerged company to whom the shares of the resulting company would be required to be issued and allotted by the resulting company pursuant to the scheme.

The eligible investor (holder as on 25 October, 2022) will receive one share of NMDC Steel bearing a face value of INR10 each, for every share held in NMDC of face value of Re 1 each.

“NMDC’s shareholders (as on 25 October, 2022) will get an additional share of NMDC Steel Limited, which possesses the steel plant (1:1 ratio) i.e. NMDC transfers the steel plant at book value, which is around 190 bn ( 65/share), and debt of around 17 bn. We expect the new shares (NMDC Steel) to list in December 2022 at around 36/share," said brokerage and research firm Edelweiss in a note.

Adjusting for the steel plant’s demerger, NMDC’s share price now works out to 121/share (target price), as per Edelweiss which has maintained its Buy rating on the stock.

In July last year, NMDC said its board approved scheme of arrangement between the company, NMDC Steel, and their respective creditors and shareholders, which entailed inter-alia demerger of Nagarnar Iron & Steel Plant (NISP). Under the Scheme, the NISP plant at Nagarnar, Chhattisgarh would be demerged from NMDC to NMDC Steel (NSL),a wholly owned subsidiary of NMDC.

“We reckon NMDC would clock around 8% YoY volume growth in 2HFY23 amid increased demand for steel. Meanwhile, we expect iron ore prices to remain subdued, which is factored in our estimates. NMDC would likely pay higher dividends ( 10/share each in FY23E and FY24E), implying a yield of around 7.8%," the brokerage's note added.

Incorporated in 1958 as a Government of India public enterprise, NMDC is India's largest producer of iron ore.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

Know your inner investor Do you have the nerves of steel or do you get insomniac over your investments? Let’s define your investment approach.
Take the test
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less

Recommended For You

GENIE RECOMMENDS

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started

Trending Stocks

×
Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout