NMDC board approves demerger of steel plant
State-owned NMDC, the country’s largest iron ore producer, on Friday said its board had approved a proposal to demerge NMDC Iron & Steel Plant.
The board met on Thursday and accorded in-principle approval to the proposal to demerge NISP at Nagarnar in Chhattisgarh, the company informed stock exchanges on Friday.
The 3-million tonne (mt) steel plant is the only greenfield project slated for commissioning in the near future. Sources familiar with the matter said the plant would have been commissioned by now had not there been the Covid19 pandemic.
“There are two major problems — lack of workers to complete the project and European technology partners are finding it difficult to travel in the wake of the pandemic,” sources said.
According to sources, the demerger could be a precursor to disinvestment. A day earlier, Chief Minister Bhupesh Baghel wrote to Prime Minister Narendra Modi against privatisation of the steel plant that had been constructed at a cost of over ~20,000 crore. According to a report, the letter mentioned that it would hurt the hopes and ambitions of the tribal people.
An ICICI Securities report said if pursued in a time bound manner, the demerger could create separate avenues of fundraising for the government of India.
The report also said the inprinciple approval to demerge, i.e. creating a separate listed company eventually with a shareholding akin to NMDC would be value accretive to minority shareholders. The exchange notice from the company, however, did not make any mention of listing.
“All incremental capex for the steel plant can be selffunded by the demerged entity and improve return ratios of the mining entity substantially; allow investors a better pure play mining opportunity,” the report added. The NMDC stock was up by 11.98 per cent on the BSE and closed at ~107.50.
Sources said deposit 4 at Bailadila, with mineable reserves of up to 107.59 mt, was earmarked for the steel plant. NMDC produces about 35 mt of iron ore from its Bailadila deposits in Chhattisgarh and Donimalai in Karnataka.
In the past, mega greenfield steel projects by Tata Steel and Essar Steel in Chhattisgarh, have tripped, either because of land woes or mine linkages. That has been the scenario for most greenfield projects in India.