NMDC stake sale via OFS route begins; stock falls 4%

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NMDC was trading 4% lower at Rs 155 on BSE in early morning trade as the government 1.5% stake sale programme in mining company commenced today. The government has fixed a floor price of Rs 153.50 apiece, is at a discount of 5% over the closing price of Rs 161.85 on Monday.

The two-day offer for sale (OFS) will open for institutional investors on Tuesday and for retail investors on Wednesday.

"The Promoter proposes to sell up to 47.46 million (1.5%) equity shares of the face value of Re 1/- each on January 09, 2018 (for non-Retail Investors only) and on January 10, 2018 (for Retail Investors and for non-Retail Investors who choose to carry forward their un-allotted bids) with an option to additionally sell up to 47.46 million (1.5%) equity shares of NMDC Share Price," the company said in a notice of OFS.

The stock hit a 52-week high of Rs 163 on BSE on Monday, January 8, 2018 in intra-day trade had outperformed the market by gaining 23% in past one month. On comparison, the benchmark S&P BSE Sensex was gained 3.3% till yesterday.

Taking cues from NMDC, the country's largest iron ore miner, lessees in Odisha have hiked ore prices by up to Rs 500 per tonne in less than a month. Over the past two weeks, prices of 62.5 per cent-grade iron ore fines have appreciated by 12-14 per cent, much in line with the steep hikes effected by NMDC for its December deliveries.Key merchant iron ore producers in Odisha like Rungta Mines and KJS Ahluwalia have gone for sharp price increases. For Rungta Mines, ex-mine price of 62.5-grade iron ore fines has gone up from Rs 1,575 to Rs 1,925 per tonne (as on December 26), a rise of 22 per cent within a month."Global prices have remained buoyant. Also, NMDC has gone for steep price hikes for iron ore recently. The combined impact of the two factors has offered scope to the iron ore miners to jack up prices. We feel the price momentum will continue as demand is supporting prices," said a leading iron ore miner.NMDC is gaining pricing power as international iron ore prices have stayed robust.

Besides, iron ore supplies in Odisha, the biggest producer, continue to remain tight on railway rake disruptions. For its iron ore despatches meant for December, NMDC has hiked prices by 13 per cent, its steepest in two years. International iron ore prices in the same period have seen a spurt of 21 per cent, giving headroom to domestic iron ore producers to raise prices.Globally, iron ore prices have remained elevated with benchmark prices of 62.5-grade fines hovering around $73 a tonne."Demand for high iron ore in China is on the rise as a result of the crackdown on pollution. Steel mills in China are buying more high-grade fines and this has led to prices gaining momentum. In the domestic market, despite a case of oversupply, iron ore prices are firming up as miners take advantage of strong international prices and local supply bottlenecks," said a metal sector analyst.Despite frequent price hikes, the landed cost of iron ore sourced from Nmdcmines is still cheaper by about 30 per cent when compared to the imported material. This price differential, along with supply constraints, gives NMDC scope to go for a further price increase.The shortfall of railway rakes has hurt movement of iron ore within the country. The problem is more pronounced in Odisha, affecting iron ore despatches to steel and pellet units.

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