Share buyback won't impact financial position: NMDC

The over Rs 7,500-crore share buyback announced by mining giant National Mineral Development Corporation (NMDC) will not impact its liquidity as the state-owned firm has more than Rs 14,800 crore cash in hand.

"The share buyback will have very little impact, if at all, on NMDC's financial condition. The company's cash and bank balance stand at over Rs 14,800 crore. Its expansion plans are on schedule and funds are earmarked for this fiscal," a senior government official said.

Earlier this month, the country's largest iron ore miner said its board has approved a proposal to buy back shares not exceeding 80.08 crore, representing 20.20% of the total equity shares at a price of Rs 94 for an aggregate consideration not exceeding Rs 7,527.76 crore.

"Now, even if the buyback is full, NMDC will still have more than Rs 7,200 crore as cash in hand, which can easily take care of the firm's capital expenditure for at least two financial years, if we go by its capex in the last few years," the official explained.

NMDC incurred a capex of Rs 3,679 crore in 2015-16, Rs 3,138 crore in 2014-15, Rs 2,518 crore in 2013-14 and Rs 1,607 crore in 2012-13.

In the medium term, the company sees limited impact on its financial health even though ore prices stay soft and is hopeful of demand picking up to the levels of 2013-14 and 2014-15.

"The last fiscal was hard, but the company is very positive that it will perform better this year and the next as there is going to be more demand for steel due to government's infra push. It will help in replenishing cash reserves," he said.

Out of the total capex last fiscal, Rs 2,507 crore was spent on the Nagarnar steel plant and over Rs 38 crore on the pellet plant at Donimalai, a company official said. The other major investment is in the slurry pipeline, which will supply iron ore to the Nagarnar plant in Bastar district.

"The first phase of 138-km Rs 4,000 crore pipeline from Bailadila to Nagarnar is in progress and will be completed by 2018. Funds for it will not be a major problem. The Centre and states have assured us all possible help," he said.