Cabinet clears 10 per cent disinvestment in NMDC

NEW DELHI, October 26, 2012





The Cabinet Committee on Economic Affairs (CCEA), on Thursday, cleared a 10 per cent stake sale of the Centre's equity holding in NMDC through the 'offer for sale' route. The transaction is likely to fetch about Rs.7,000 crore.



The CCEA has approved the disinvestment of 10 per cent paid-up equity capital (39.65 crore shares of face value of Re.1 each) of NMDC out of the government's shareholding of 90 per cent through 'Offer for the sale of shares through stock exchange' (OFS) method, as per SEBI Rules and Regulations, an official statement said here.



STAKE SELL-OFF



Following the stake sell-off, the government's equity holding in the iron ore mining 'Navaratna' public sector undertaking under the administrative control of the Ministry of Steel will come down to 80 per cent.



Although NMDC with a paid-up equity capital of Rs.396.47 crore as of March 31 this year is primarily engaged in the ore mining business, it is also expanding its activities towards production of steel and other value-added products.



The country's largest producer of iron ore, it is operating two mining complexes in Chhattisgarh and one in Karnataka.



The government, it may be recalled, had proposed disinvestment in NMDC earlier but the move had to be shelved on account of poor market conditions.



As and when this transaction comes through, it would be the first issue during this fiscal. For, having set a disinvestment target of Rs.30,000 crore for 2012-13, the government has not been able to roll out any public issue thus far this fiscal, primarily owing to uncertain market conditions.



For the very same reason, the government could manage to mop up a paltry Rs.14,000 crore through disinvestment during the last financial year as against a budgeted target of Rs.40,000 crore set for the fiscal.



OFS METHOD



Alongside, at the meeting chaired by Prime Minister Manmohan Singh, the CCEA also approved authorisation in favour of EGoM (Empowered Group of Ministers) to change the method of disinvestment from the OFS method, if the same is required subsequently due to market conditions or due to change in SEBI Rules and Regulations.



Moreover, the floor price, the number of tranches, the basis of allotment and the number of shares to be allotted in each of the tranches will also be decided by the EGoM.



According to the official statement, the EGoM may also accept or cancel the offer, if there is not enough demand at or above the floor price; in case of over-subscription in one or more tranches, the EGoM can decide whether the over-subscribed amount is to be retained subject to the overall disinvestment of 10 per cent.



Allotment of additional shares to eligible and willing employees can be offered at a discount of 5 per cent to the issue or discovered (lowest cut-off) price up to a maximum of 0.50 per cent of the paid-up equity capital subsequent to completion of the transaction under OFS.



The method and procedure of allotment of shares to the employees will be worked out in consultations with merchant bankers or advisors to the issue, the statement said.
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