Govt to offload stake in NMDC
The government?s disinvestment programme seems to have gone into an overdrive with the National Mineral Development Corporation Ltd being the next PSU on the block.india Updated: Jan 21, 2006 02:52 IST
The government’s disinvestment programme seems to have gone into an overdrive with the National Mineral Development Corporation Ltd being the next PSU on the block.
After selling eight per cent stake in Maruti Udyog Ltd and clearing the Power Finance Corporation float while divesting its five per cent stake (an additional five per cent to go to the government), the government is readying to divest 15 per cent equity in India’s single largest iron ore producer and exporter.
The government has proposed the offer of sale for 15 per cent stake out of the total holding of 98.384 per cent through the process of book building in the next phase of disinvestment to be cleared by the Cabinet shortly.
While the government holds 13,00,22,046 shares amounting to 98.384 per cent, banks and financial institutions including New India Assurance, Oriental Insurance and United India Insurance, LIC, NIC, GIC etc hold 1.414 per cent in the PSU. The Indian public and NMDC employees hold 0.199 and 0.003 per cent in the corporation.
While the government proposes to follow the earlier precedent as far as the book building issue is concerned, it proposes to split the share of NMDC before the offer for sale.
The note, which has been forwarded for consideration by the Cabinet Committee on Economic Affairs, has got the nod from the Ministry of Steel but with some stipulations. The ministry has recommended that the government equity should at no point go below 76 per cent and no single entity should hold more than one per cent equity.
The Department of disinvestment is in consultation with the Ministry of Steel and Department of Expenditure to consider issue of bonus shares before the offer for sale. There seems to be a consensus among the relevant parties on the issue of bonus shares on a 1:1 basis.
While the Ministry of Steel supports the issue of bonus shares, it has proposed that there should be no further requirement of paying any special dividend. In a representation to the Department of Disinvestment, the Steel Ministry has pointed out that paying of future dividends would erode the much-needed reserves kept aside for the company’s expansion. Further, the reserves have been built only over the last two to three years as NMDC operates in an industry that is cyclical in nature.
For 2004-05, NMDC posted a turnover of Rs 2229.99 crore and a net profit of Rs 755.4 crore. The board had recommended a dividend of 114.5 per cent to the shareholders for the last fiscal.