NMDC issue to follow book-building route...

EGoM to set price band on Tuesday; FPO opens on Wednesday.

After the poor response to follow-on public offers (FPOs) of NTPC and Rural Electrification Corporation (REC), the Union government has decided to use the standard book-building method to sell shares in NMDC, the country’s largest mining company. The sale is estimated to fetch around Rs 13,000 crore.

“Comparing this with NTPC and REC issues will not be fair. NMDC has a low floating stock and so we did not want to use the French auction method. Also, there are no regulatory issues in using the book-building process. So, we decided to switch to this process for NMDC,” said Union Disinvestment Secretary Sumit Bose. NTPC and REC issues had used the French auction method.

In the book-building method, investors can bid within a set price band. In French auction method, institutional investors bid above a base price while retail investors bid at the floor price. Institutional investors with the highest bids are given priority. Retail response to REC and NTPC issues was poor.

The government has announced a discount of 5 per cent at the lower end of the price band to retail investors. The FPO will open on March 10 and close on March 12. The government will sell 8.38 per cent stake in NMDC, which will bring down its holding to 90 per cent.

Bose said an empowered group of ministers would finalise the price band on March 9 and this would be the last disinvestment for financial year 2009-2010. “Another public sector company, SJVN (Satluj Jal Vitran Nigam), has applied for regulatory approvals and will announce its IPO soon,” Bose said on the sideline of an NMDC conference on Thursday.

NMDC Chairman and Managing Director Rana Som said the company expected to commission three iron ore mines in the next three years. “The mines, in Chhattisgarh, Jharkhand and Karnataka, will have an annual capacity of 24 million tonnes,” he told reporters.

Som said the company was looking to acquire mines abroad for rock phosphate and potash.