NMDC -; NMDC Steel demerger approved by MCA

12 Oct 2022 , 11:46 AM

The demerger of NMDC Steel from NMDC has been allowed by the Ministry of Corporate Affairs (MCA), despite rumours that steel behemoths like ArcelorMittal, POSCO, Jindal Steel, and JSW Steel were ready to bid for the steel production facility of India’s largest iron ore producer, NMDC.

On October 11, NMDC claimed it had received the MCA’s orders on Tuesday and was working to comply with the demands outlined in the ministry’s order in a late-night communiqué to stock exchanges.

The Ministry of Steel’s state-owned company, NMDC, is primarily involved in the investigation of a variety of minerals, including beach sands, limestone, dolomite, gypsum, bentonite, magnesite, tin, tungsten, and copper, among others.

In order to manufacture and trade stainless steel, silicon, special steel, and other related inputs, NMDC floated NMDC Steel in January 2015 as part of its strategy to diversify into value-added products.

The 3-million-ton-per-year Greenfield integrated steel plant in Nagarnar in Chhattisgarh was to be built using the special purpose vehicle that NMDC established to enter the steel industry, and it would cost more than Rs23,000 crore. This was a component of the road map the Indian government mapped out to increase the nation’s steel production to 300 million tonnes annually by 2025.

NMDC had stated in its vision for 2025 that it would act as a developer for steel plants and would invite investors to commission and run the facilities at an appropriate time. As a result, the iron ore producer offered a plan to demerge the steel industry into a separate company and then invite investors in order to increase value to its stakeholders.

The demerger of the steel business from NMDC and the strategic disinvestment of the steel business by selling the entirety of the government’s holding in NMDC Steel to a strategic buyer received preliminary approval from the Cabinet Committee on Economic Affairs, which is presided over by Prime Minister Narendra Modi, in October 2020.

The Indian government currently owns 60.79% of the shares in NMDC.

The shareholders and lenders recently agreed on a plan to demerge NMDC Steel from NMDC, under which each NMDC shareholder will get one equity share of NMDC Steel for every equity share they now own. Subsequently, NMDC Steel shares will be offered on stock exchanges.

As part of the plan, NMDC Steel will receive assets worth Rs18,650 crore and liabilities around Rs1,602 crore.

The demerger of NMDC Steel received approval from the Ministry of Steel in March 2022, whereas the board of NMDC accepted it in July 2021.

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