MMTC begins process to exit unprofitable entities, starting with NINL, ICEX

MMTC, a central government-owned trading company, has launched the process to exit unprofitable entities. The trading giant owns the largest stake in loss-accumulating steel company Neelachal Ispat Nigam Ltd (NINL) and has minority equity participation in Indian Commodity Exchange (ICEX). MMTC plans to sell stakes in both entities given their underwhelming performance.

MMTC has floated the Request for Proposal (RFP) to sell its six per cent stake in ICEX, less than a month after it notified its intent to divest equity in NINL. With a stake of 49.9 per cent, MMTC is presently the biggest shareholder in NINL, the steel PSU which has accumulated losses for the past five years in succession. 

The divestment of six per cent stake in ICEX entails sale of 32 million shares of face value Rs five each. The equity shares  would be sold to the the bidder quoting the highest price per share. The minimum reserve price has been set at Rs 9.4 per share.

Ved Prakash, chairman of MMTC Ltd did not respond to phone calls or text messages.

MMTC had a sequence of flip flops on its strategy to retain or sell equity in ICEX. Initially, the trading giant had decided to pull out of the commodities exchange owing to the latter's tepid performance and lower trading volumes.  Later, MMTC did a volte-face face after ICEX regained its mojo with the launch of diamond futures and its merger with the National Multi Commodity Exchange (NMCE). In the latest move, MMTC has reversed its decision, deciding to offload its stake as being a minor equity participant did not make good business sense. Presently, Reliance Exchange Next and Indiabulls Housing Finance Ltd are the biggest shareholders in ICEX.

Separately, MMTC is also gearing up to exit NINL. In a filing with the Bombay Stock Exchange (BSE) on June 27 2019, MMTC informed on its intent to divest equity in the loss making steel company.

NINL is among the 200 state level public enterprises accumulating losses. Their cases are being considered for divestment by the Union government. CPSEs that have historical investments poured into such loss incurring firms, will now have the autonomy to offload stakes. 

NINL is co-promoted by MMTC and two Odisha government entities- Odisha Mining Corporation (OMC) and Industrial Promotion & Investment Corporation of Odisha Ltd (Ipicol). Between them, OMC and Ipicol hold 26 per cent stake. CPSEs like NMDC Ltd, BHEL Ltd and Mecon Ltd own minority stakes in NINL.

Apart from MMTC, the Odisha government controlled entities are also aiming to pull out of NINL which has been consistently piling up losses for the past five years. In the last fiscal, the state-controlled player showed signs of a turnaround by registering profit at the operational level.

A source close to the development said that NINL needs Rs 1,700 crore capital infusion to turn the tide. NINL has already treaded on the turnaround trail in FY19 with the successful completion of the blast furnace capital repair work in April, 2018. It has also diversified into billets and TMT bar production to shore up margins. NINL operates 1.1 million tonne steel plant at Duburi within Odisha's Kalinganagar Industrial Complex.

Firm has floated RFP to sell its 6% stake in ICEX, less than a month after it notified its intent to divest equity in NINL

Jayajit Dash

Bhubaneswar

MMTC, a Central Government-owned trading company, has launched the process to exit unprofitable entities. The trading giant owns the largest stake in loss-accumulating steel company Neelachal Ispat Nigam Ltd (NINL) and has minority equity participation in Indian Commodity Exchange (ICEX). MMTC plans to sell stakes in both entities given their underwhelming performance.

MMTC has floated the Request for Proposal (RFP) to sell its six per cent stake in ICEX, less than a month after it notified its intent to divest equity in NINL. With a stake of 49.9 per cent, MMTC is presently the biggest shareholder in NINL, the steel PSU which has accumulated losses for the past five years in succession. 

The divestment of six per cent stake in ICEX entails sale of 32 million shares of face value Rs five each. The equity shares  would be sold to the the bidder quoting the highest price per share. The minimum reserve price has been set at Rs 9.4 per share.

Ved Prakash, chairman of MMTC Ltd did not respond to phone calls or text messages.

MMTC had a sequence of flip flops on its strategy to retain or sell equity in ICEX. Initially, the trading giant had decided to pull out of the commodities exchange owing to the latter's tepid performance and lower trading volumes.  Later, MMTC did a volte-face face after ICEX regained its mojo with the launch of diamond futures and its merger with the National Multi Commodity Exchange (NMCE). In the latest move, MMTC has reversed its decision, deciding to offload its stake as being a minor equity participant did not make good business sense. Presently, Reliance Exchange Next and Indiabulls Housing Finance Ltd are the biggest shareholders in ICEX.

Separately, MMTC is also gearing up to exit NINL. In a filing with the Bombay Stock Exchange (BSE) on June 27 2019, MMTC informed on its intent to divest equity in the loss making steel company.

NINL is among the 200 state level public enterprises accumulating losses. Their cases are being considered for divestment by the Union government. CPSEs that have historical investments poured into such loss incurring firms, will now have the autonomy to offload stakes. 

NINL is co-promoted by MMTC and two Odisha government entities- Odisha Mining Corporation (OMC) and Industrial Promotion & Investment Corporation of Odisha Ltd (Ipicol). Between them, OMC and Ipicol hold 26 per cent stake. CPSEs like NMDC Ltd, BHEL Ltd and Mecon Ltd own minority stakes in NINL.

Apart from MMTC, the Odisha government controlled entities are also aiming to pull out of NINL which has been consistently piling up losses for the past five years. In the last fiscal, the state-controlled player showed signs of a turnaround by registering profit at the operational level.

A source close to the development said that NINL needs Rs 1,700 crore capital infusion to turn the tide. NINL has already treaded on the turnaround trail in FY19 with the successful completion of the blast furnace capital repair work in April, 2018. It has also diversified into billets and TMT bar production to shore up margins. NINL operates 1.1 million tonne steel plant at Duburi within Odisha's Kalinganagar Industrial Complex.