NMDC board approves demerger of NMDC Steel

The board of NMDC at its meeting today (13 July) approved the scheme of arrangement for demerger between the company and NMDC Steel.

The scheme is subject to necessary statutory and regulatory approvals including the approval of the Securities and Exchange Board of India (SEBI), stock exchanges, Ministry of Corporate Affairs, Government of India and respective shareholders and creditors, if any, of each of the companies involved in the scheme.

NMDC Steel, a wholly owned subsidiary of NMDC, currently does not have any business operations. It is authorized by its memorandum of association to carry on the business of, amongst others, manufacturing, prospecting, raising, operating, buying, selling, importing, ex.porting or otherwise dealing in various categories of steel and iron ore.

The Government of India has charted a road map to augment India's steel production to 300 million tonnes per annum (MTPA) by 2025. To fulfill this vision, green-field steel plants are being promoted through Special Purpose Vehicles (SPVs) in mineral rich states of Chhattisgarh, Jharkhand, Kamataka and Odisha. It has been envisaged that the SPV being set up at these states would act as a facilitator and developer for the steel plant. It would acquire the required land, obtain statutory clearances for setting up the plant, organize water & power allocation for the site, along with dedicated raw material supply agreement. On completion of the above activities, the SPV would invite for suitable investor/s, who would construct, develop and operate the steel plant.

NMDC is setting up a 3 MTPA capacity greenfield integrated steel plant i.e. NISP (NMDC Iron & Steel Plant) at Nagamar, located 16 km from Jagdalpur in Chhattisgarh state. The decision to construct the NISP was taken keeping in view with linkage with iron ore reserves and availability of investable surplus.

NISP has progressed significantly further than the other steel SPVs. The only difference is that NISP is being developed and constructed within NMDC as opposed to being developed in an SPV. NMDC has specifically stated that its role would be that of a developer for steel plants and at suitable time invite investors to commission and operate the plants.

NMDC is therefore considering proposed scheme to add more value to company's stakeholders by demerging NISP into separate company and subsequently inviting an investor.

In October 2020, the Cabinet Committee on Economic Affairs chaired by the Prime Minister Narendra Modi gave its 'in-principle' approval to the demerger of NISP from NMDC and strategic disinvestment of the NMDC Steel by selling entire Government of India stake in the NMDC Steel to a strategic buyer.

There is no cash consideration involved in the scheme. As consideration for transfer and vesting of the demerged undertaking into NMDC Steel, it shall issue and allot 293,06,05,850 equity shares of face value of Rs 10 each as consideration to each equity shareholder of NMDC, whose name is recorded in the register of members of NMDC as on record date.

On a consolidated basis, NMDC's net profit surged 717.15% to Rs 2,835.54 crore on 114.83% jump in revenue from operations to Rs 6,847.57 crore in Q4 March 2021 over Q4 March 2020.

NMDC is India's single largest iron ore producer, presently producing about 35 million tonnes of iron ore from 3 fully mechanized mines, two located in Chhattisgarh and one in Karnataka.

Shares of NMDC rallied 3.80% to close at Rs 172.05 on BSE. As on 31 March 2021, the Government of India held 68.29% stake in the company.

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