NMDC gets MCA approval for demerger of steel unit; stock rises 1%

Shares of mining major NMDC gained over 1% in opening trade on Wednesday after the country's largest iron ore mining company received nod for demerger of the steel unit, NMDC Steel into a separate entity. The Ministry of Corporate Affairs (MCA) has approved the demerger of NMDC Steel from NMDC, it said in an exchange filing on Tuesday. As per the scheme of agreement, NMDC’s shareholders will get one equity share of NMDC Steel for every equity share held. 

In a late evening filing to exchanges on Tuesday, NMDC said the MCA has sanctioned the scheme and the company is in the process of complying with the requirements as suggested in the ministry’s order and the observation letters received from BSE, NSE and the Calcutta Stock Exchange.

“Upon the coming into effect of this scheme, and in consideration of the transfer and vesting of the demerged undertaking in the resulting company, the resulting company shall, without any further application, act, instrument or deed, issue and allot to all the equity shareholders of the Demerged Company, whose names appear in the register of members as on Record Date, 1 equity share of the resulting company of ₹10 each fully paid-up for every 1 equity share held in the demerged company of ₹1 each fully paid-up,” NMDC said.

NMDC, a public sector enterprise under the Ministry of Steel, had filed an application on July 12 for the demerger of its steel unit, NMDC Iron and Steel Plant (NISP), into a separate company, NMDC Steel. The Steel Ministry had convened two separate meetings separate meetings of shareholders and creditors of NMDC for approval of the demerger proposal. The mining company owes over ₹1 crore to its creditors as of September 30, 2021.

The scheme of demerger has already been approved by the board of directors, shareholders, and creditors over the last few months.

NMDC is engaged in the exploration of a wide range of minerals such as iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, coal etc. In a bid to focus on its value-added products, NMDC Steel was incorporated in 2015 to primarily deal in the business of trade, manufacturing, selling, importing and purchasing of stainless steel, silicon, special steel and other allied input or other materials and for that purpose to construct, install, operate, manage and maintain all plants, mines and establishments.

NMDC is setting up a 3 million tonne per annum steel plant at Nagarnar near Bastar in Chhattisgarh. The plant is constructed over 1,980 acres at an estimated cost of ₹23,140 crore.

In October 2020, the Union Cabinet approved the demerger of NSP from NMDC, and sale of the Centre's entire stake to a strategic buyer. The central government owns 60.79% shares in the company, as per the latest shareholding available on the BSE. Post demerger, NMDC Steel will be a separate company which will be listed on the domestic exchanges – BSE and NSE.

Following the announcement, shares of NMDC were trading 0.4% higher at ₹131.45 on the BSE. In the first hour of trade so far, the mining stock gained as much as 1.2% to ₹132.50, while market capitalisation rose to ₹38,522.8 crore. In comparison, the BSE benchmark Sensex was trading 30 points higher at 57,177 levels.