Government raises $1.1 billion in NMDC share sale

MUMBAI Wed Dec 12, 2012 8:00pm IST

1 of 4. Labourers work inside a steel factory on the outskirts of Agartala, Tripura June 10, 2010.

Credit: Reuters/Jayanta Dey/Files

Related Topics



MUMBAI (Reuters) - India raised $1.1 billion selling a stake in miner NMDC Ltd (NMDC.NS) in a fillip for its efforts to rein in a widening fiscal deficit through sales of state assets.

The government aims to secure $5.5 billion in the current fiscal year ending next March by divesting stakes in state companies, a target many economists consider to be optimistic.

Before Wednesday, it had raised just $148 million in a process hit by volatile markets and wrangling among government officials.

The share sale was the largest by the government since a $2.5 billion auction of stock in state explorer Oil and Natural Gas Corp (ONGC.NS) at the end of the previous financial year that required large bids from state investors.

Many economists expect India's fiscal deficit to hit around 5.6 percent to 5.8 percent of gross domestic product this fiscal year, above an official target of 5.3 percent.

In the NMDC sale, the government offered 396.47 million shares, or 10 percent of its stock, at a floor price of 147 rupees, an 8 percent discount to Tuesday's close.

By the close, the offer had attracted bids for 686.92 million shares at an indicative weighted average price of 149.15 rupees, exchange data showed.

"The pricing was the key," said a fund manager at a large domestic mutual fund who bid for NMDC shares and declined to be named. "This should bolster the government's confidence that there is interest in public sector stocks at the right price."

The government, which is expected to step up its divestment programme in the months ahead, has approved share sales in top power utility NTPC Ltd (NTPC.NS), explorer Oil India Ltd (OILI.NS), state trading firm MMTC Ltd (MMTC.NS) and power equipment maker Bharat Heavy Electrical Ltd (BHEL.NS).

"The message is loud and clear--a quality asset at the right price will find a buyer," said Jagannadham Thunuguntla, equity head at SMC Global Securities.

"On the face of it, it now looks that the government should be able to meet its disinvestment target," he said, adding that upcoming share sales are in larger companies with solid fundamentals.


Foreign institutional investors bid for about half of the total shares on offer, a finance ministry official said, with domestic funds making up the balance of the oversubscription.

State investors sought nearly 40 percent of the offer but are expected to get an allocation of about as most of their bids were at the floor price, said the official, who asked not to be named.

In two other recent government deals, state financial institutions ended up buying the bulk of the offer due to limited private sector interest.

Analysts expected the sale to generate robust demand, given what they said were attractive valuations, strong growth prospects for the company and a limited supply of traded shares.

NMDC, India's top ore miner, accounts for about 15 percent of iron ore mined in the country, with annual production capacity of 30 million tonnes.

Shares in the company closed 3.3 percent lower at 154.30 rupees, but still at a premium to the indicative offer price. The stock has declined 4 percent in 2012, compared with a 25 percent gain in the main stock index .BSESN.

Citigroup (C.N), Goldman Sachs (GS.N), Bank of America Merrill Lynch (BAC.N) and Indian investment banks ICICI Securities and Axis Capital were the bankers for the NMDC share offering.

(Additional reporting by Sumeet Chatterjee and Abhishek Vishnoi in MUMBAI and Arup Roychoudhury in NEW DELHI; Editing by Tony Munroe and David Cowell)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Economic Pulse


Deregulation Impact

Deregulation Impact

Private fuel retailers to dip toe, not dive back, into India  Full Article 

Gold Import

Gold Import

RBI will not change gold import rules - sources  Full Article 

Idea Results

Idea Results

Idea Cellular Q2 profit up 69 percent  Full Article 

An RBI First

An RBI First

RBI releases minutes of financial stability council's Aug meet  Full Article 

Global Shares

Global Shares

Japanese stocks lead shares worldwide, IBM weighs on Dow  Full Article 

IBM Chip Unit

IBM Chip Unit

IBM to pay Globalfoundries to take chip unit  Full Article 

IBM Earnings

IBM Earnings

IBM ditches 2015 operating EPS target, shares slump 7 pct  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage