Government of India Hopes to Raise More Than $4.9 Billion from Sale of NMDC Shares

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The government of India is hoping that the sale of a stake in iron ore mining company National Mineral Development Corporation Limited (BSE:526371) (NMDC) (Hyderabad, Andhra Pradesh) will raise more than $4.9 billion. According to sources in the finance ministry, the public offering is likely to be finalized in mid-January 2010, and the follow-up offer is likely to be issued in March 2010. About 8.4% of NMDC's stake, or 330 million shares, are expected to be sold during the disinvestment process. No new shares will be issued, and the sale proceeds would be collected by the government, which has a 98.39% stake in the company. While global financial services company Morgan Stanley (NYSE:MS) (New York, New York) has been retained as the lead manager for the public offering, five other investment bankers would also be involved in executing the sale.

The sale will be conducted in different ways for different buyers. While high net worth individuals, foreign institutional investors (FII) and financial institutions would purchase the shares through an auction, retail investors would be allotted shares at a floor price that would be fixed prior to the auction. Retail investors would benefit from this offer if the auction price turns out to be higher than the floor price. The potential of NMDC is believed to have been assessed in comparison to international mineral companies such as mining and exploration company Rio Tinto plc (NYSE:RTP) (London, England), and the performance of NMDC has been found to be at par with the global majors.

In September 2009, Indian Finance Minister Pranab Mukherjee said that no more than a 10% stake in publicly listed, state-operated companies would be sold during the present times. Coal-mining company Coal India Limited (CIL) (Kolkata, West Bengal), Shipping Corporation of India (BSE:523598) (Mumbai) and steel making company, Steel Authority of India Limited (BSE:500113) (SAIL) (New Delhi) are three other state-run companies that may see some disinvestments. The government has raised $1.8 million since August 2009 by selling shares in the state-run hydroelectric power generating company NHPC Limited (BSE:533098) (Faridabad, Haryana) and exploration and production company Oil India Limited (BSE:533106) (Noida, Uttar Pradesh). The government already has approved the sale of shares in thermal power company NTPC Limited (BSE:532555) (New Delhi), financial institution Rural Electrification Corporation Limited (BSE:532955) (New Delhi) and Satluj Jal Vidyut Nigam Limited (Shimla, Himachal Pradesh).

NMDC is managed by India's Ministry of Steel, and the company is involved in the exploration of minerals such as iron ore, limestone, magnesite, rock phosphate, tin, tungsten, beach sands, bentonite, copper, dolomite, diamond, graphite, and gypsum, among others. With a production capacity of about 30 million tons of iron ore, the company is the country's single largest producer and exporter of iron ore. NMDC operates two mines at Bailadila in Chhattisgarh, and one at Donimalai in Karnataka. India's only mechanized diamond mine is run by NMDC as well; the 100,000-carat-per-year mine is at Panna in Madhya Pradesh.

NMDC consistently has been reporting profits, and at the end of the 2008-09 fiscal year, the company reported a profit before tax of more than $1.4 billion. The previous fiscal year, 2007-08, had seen a profit before tax of more than $1.1 billion. According to estimates, the company will require almost $3 billion over the next three years to implement its expansion plans.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.