NMDC's demerged Chhattisgarh unit hits 5% upper circuit on market debut

A combined, around 7.5 million equity shares had changed hands and there were pending buy orders for 19 million shares on the NSE and BSE till 10:16 AM

Shares of NMDC Steel were locked at the 5 per cent upper circuit at Rs 31.75 on the BSE in Monday's intra-day on its debut. NMDC Steel is the demerged entity from NMDC.

The stock of iron & steel company, which opened at Rs 30.25 and later hit a low of Rs 29.05 on the BSE, saw a combined 7.5 million equity shares changing hands in the first one-hour of trades on the BSE and NSE, the exchange data shows. There were pending buy orders for over 19 million shares. In comparison, the S&P BSE Sensex was up 0.12 per cent at 61,078 at 10:14 AM.

The equity shares of NMDC Steel were listed and admitted to dealings on the exchange in the list of T group of securities. The scrip will be in Trade-for-Trade (T2T) segment for 10 trading days. In the T2T segment, each trade has to result in delivery and no intra-day netting of positions is allowed.

The board of directors of NMDC on 13 July, 2021, had approved the scheme of arrangement between the company and NMDC Steel and their respective creditors and shareholders, entailing inter-alia demerger of Nagarnar Iron & Steel Plant (NISP). Under the Scheme, the NMDC Iron & Steel Plant at Nagarnar, Chhattisgarh demerged from NMDC into NMDC Steel, a wholly-owned Subsidiary of NMDC. NMDC issued one equity share of Rs 10 each of NMDC Iron & Steel Limited for every one equity share of face value of Rs 10 each to shareholders of NMDC.

On rationale behind scheme of arrangement, NMDC in FY22 annual report said, government of India has charted a road map to augment India’s steel production to 300 MTPA by 2025. To fulfill this vision, green-field steel plants are being promoted through Special Purpose Vehicles (“SPVs”) in mineral rich states of Chhattisgarh, Jharkhand, Karnataka and Odisha. It has been envisaged that the SPV being set up at these states would act as a facilitator and developer for the steel plant. It would acquire the required land, obtain statutory clearances for setting up the plant, organize water & power allocation for the site, along with dedicated raw material supply agreement. On completion of the above activities, the SPV would invite for suitable investor/s, who would construct, develop and operate the steel plant.

As part of expansion, value addition and forward integration programme, and also in consonance with the desire of the Government of India and Government of Chattisgarh, NMDC is setting up a 3 MTPA capacity Greenfield integrated steel plant (“NMDC Iron & Steel Plant” or “NISP”) at Nagarnar, located 16 km from Jagdalpur in Chhattisgarh State.

The decision to construct the NISP was taken keeping in view with linkage with iron ore reserves and availability of investable surplus. NISP has progressed significantly further than the other Steel SPVs. The only difference is that NISP is being developed and constructed within NMDC Limited as opposed to being developed in an SPV.

Also, NMDC Vision 2025, whilst mentioning forward integration has specifically stated that its role would be that of a developer for steel plants and at suitable time invite investors to commission and operate the plants. NMDC is therefore considering proposed scheme to add more value to Company’s stakeholders by demerging NISP into a separate company and subsequently inviting investors.

To this effect, in October 2020, the Cabinet Committee on Economic Affairs gave its ‘inprinciple’ approval to the demerger of NISP from NMDC Limited and strategic disinvestment of the NMDC Steel by selling entire Government of India