NMDC expects 50 mt production by 2014

NMDC Ltd, the country’s largest iron ore producer, is expected to increase its production to 50 million tonnes (mt) by 2013-2014 from the present 30 mt. It also plans to introduce a new pricing mechanism from April 1.

The company’s follow-on public offer (FPO), offering 330.5 million equity shares, opens tomorrow. The company is expecting a rise in prices due to growth in domestic as well as international demand. Following the announcement of the price band, NMDC shares tumbled 9.2 per cent to Rs 365. It finally closed Tuesday’s trade at the Bombay Stock Exchange at Rs 375.65, down 6.2 per cent.

The company has also engaged an international advisory body to make recommendations on the pricing structure, as its agreement for iron ore supply expires on March 31, officials said here today, while announcing the price band for the FPO, which has been fixed at Rs 300-350 per equity share by an empowered group of ministers (EGoM).

At present, prices vary anywhere between Rs 2,000 and Rs 3,700 per tonne depending on the quality of the ore. “We expect production to reach 50 million tonnes by 2013-2014 from 30 million tonnes at present,” NMDC Chairman Rana Som said.

The company is also setting up a steel plant at Jagdalpur in Chhattisgarh, with a capacity of 3 million tonnes, expected to be operational by early 2014. It also obtained 2,500 acres in Karnataka for the construction of another steel plant with an investment of Rs 16,000 crore.

Som added the company planned to utilise the money by spending Rs 15,600 crore in the next five years on the steel plant, Rs 1,400 crore on the pallet plant projects and 2,000 crore would be set aside for exploration costs.

NMDC’s net profit after tax during April-December 2009 decreased to Rs 2,381.50 crore, down 28 per cent from Rs 3,309.36 crore in the same period in 2008.

The government, which owns 98.38 per cent of the paid-up equity capital of the company, plans to divest 8.38 per cent stake through the FPO, which will bring its shareholding down to 90 per cent. This is the third such sale the government will be resorting to after selling stakes in NTPC and REC in an effort to meet its fiscal deficit target.

The government is planning to raise Rs 10,000 crore from this FPO. It has received around Rs 14,000 crore as proceeds from the NTPC and REC stake sale.

“The proceeds that would be available to the government through divesting its stake will enable it to spend in social sector projects like rural electrification, Indira Awas Yojana and NREGA, among others,” Disinvestment Secretary Sumit Bose said.