The issue got subscribed 1.25 times, while the NTPC follow-on offer was subscribed 1.29 times. This FPO was the third in 2010 by the UPA government under its divestment plan, writes SUGATO HAZRA
The NMDC follow-on offer had been criticized as over-priced by almost the entire market intermediaries including media analysts. When the issue got subscribed 1.25 times, the critics did not fail to point out that it was the largest cheque from the nationalized insurance giant LIC which had bailed the disinvestment out. The fact that retail investors were not seen much excited was rubbed in again and again.
First take a look at the facts. The FPO received bids for over 41.38 crore shares, 1.25 times more than 33.22 crore shares on offer, as per the data available with the National Stock Exchange. This FPO was the third in 2010 by the UPA government under its divestment plan.
Earlier, NTPC follow-on offer was subscribed 1.29 times, while the REC issue was subscribed over three times on the final day. In case of NMDC issue, the portion reserved for qualified institutional buyers was subscribed 2.28 times, while the non-institutional and retail investors each subscribed to 22 per cent of the shares reserved for them. Among the major bidders had been state-run LIC, SBI, UTI and Canara Bank and also foreign funds like Wellington, Credit Suisse and Macquarie. Most of the bids came in at the lower end of the price band of rs 300-350 a share. But the money raised even at the lower end of the band had been a staggering Rs 9,900 crore. That the state-owned miner is not exactly as untouchable as many wanted us to believe could be gauged from the fact that steel majors Tata Steel and ArcelorMittal were believed to have put in bids for the issue.
The government divested 8.38 per cent of its 98.38 per cent holding in NMDC. It reserved 35 per cent of the issue for retail buyers, while 50 per cent was reserved for QIBs, which include FIIs and mutual funds. The share offer price was at a discount to the market price of around Rs 400. But from the outset there had been a strong lobby working against the success of the issue.
First behind the scene there had been a group of Investment Banks who feel that they only could lead to the success of an issue. Unfortunately, the government followed its standard procedure of selecting the bankers — being the government it could not do anything else. The bidding process saw new investment bankers winning the mandate. This created two problems. First the bankers selected were inexperienced, therefore, lacked contact and innovativeness. They had an ally in the lack of experience of the government officials managing the process. As a result the entire communication process of the companies selling stake was unimaginative.
Second and no less important was the losers in the bidding process, investment banks with the experience and contact among the market intermediaries, like analysts, brokers and media, feeding negative stories on the government divestment. One can easily attack the government since the officials are always defensive. Hence the entire marketing effort of the PSU shares started on a weak note. NMDC was a bigger casualty since the amount raised was larger, in fact one among the largest in the
country.
Incorporated in the year 1958 as a Government of India fully owned public enterprise, NMDC is under the administrative control of the Ministry of Steel, Government of India. Since inception, it is involved in the exploration of wide range of minerals including iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, beach sands etc.
NMDC, being India’s single largest iron ore producer and exporter, is presently producing about 30 million tonnes of iron ore from 3 fully mechanized mines viz, Bailadila Deposit-14/11C, Bailadila Deposit-5, 10/11A (Chhattisgarh State) and Donimalai Iron Ore Mines (Karnataka State) which are awarded ISO 9001-2000 certification.
In addition to its Iron ore operations, the company also operates a diamond mine at Panna (Madhya Pradesh), one of the largest diamond mines in Asia, and owns a wind power facility with seven towers in the State of
In recognition to the company’s growing status and consistent excellent performance, the company has been categorized by the Department of Public Enterprises as “Navratna” Public Sector Enterprise in 2008.
It is presently producing about 22 million tonnes of iron ore from its Bailadila sector mines and 7 million tonnes from Donimalai sector mines. The company plans to start value-added projects such as steel production and has signed an MoU with the state government of Chhattisgarh to develop a steel plant with a capacity of 3 mtpa at Jagdalpur.
The company also has plans to develop a steel plant in Karnataka. NMDC is also investing in development of renewable energy resources as an environment friendly investment. Moreover, NMDC views that it will be sharpening its focus on mining of coal and fertilizer raw materials such as potash and rock phosphate to help India achieve energy and fertilizer security.
NMDC has large reserves of high grade iron ore and therefore commands premium pricing and enjoys customer loyalty. It is the largest producer of iron ore in India by volume.
It produced 28.5 million tonnes of iron ore in Fiscal 2009, putting it in a strong negotiating position for purposes of the sale of its iron ore products.The key factors contributing to the company's ability to lower its costs of production include the mechanization of its mines, its focus on continually reducing mining costs and seeking operational efficiency improvements, including logistics, and its access to a relatively large and inexpensive labour and talent pool in India.
The company’s new expansion projects are adjacent to its existing mines, enabling the company to utilize a portion of its existing infrastructure for new production.
NMDC with its large and dedicated R&D center at Hyderabad has been undertaking technology development projects related to mineral processing, flow sheet development, mineralogical studies and project development. Moreover, it has a strong in-house capability to undertake exploration to expand its reserves as well as to diversify its production.
Under Rana Som’s leadership the company intends to expand its exploration activities to acquire more prospecting licenses and mining leases in India and abroad, including for non-ferrous minerals. There had been several proposals with NMDC to prospect mines abroad — a large one in Brazil for example.
In this case the owners of the mineral deposit approached NMDC on its own and sought partnership. An interesting aspect of NMDC effort to acquire mine equities abroad is to take private sector as partner so that due diligence is thorough. When the prospective seller maintains stake one can assume the property to be of good value.
A question that analysts posed during the NMDC offer was why the miner did not contain itself to remain as a merchant miner. The underlying assumption is the profitability of mines as compared to the same from steel making. What the question winked at is the issue of national development. Can a responsible national mining company just be content with mining and selling the assets to any buyer even outside the country? To a get-rich-quick stock market analyst this is the only criterion. So the judgment was pronounced even before the issue announced its pricing. NMDC is an overpriced issue, not to be touched.
Discounted in the process had been the fact that NMDC has signed an MoU with the state government of Chhattisgarh to develop a steel plant with a capacity of 3 mtpa at Jagdalpur, and also has plans to develop a steel plant in Karnataka. Furthermore, the company expects to complete its acquisition of Sponge Iron India Limited in early 2010, a company involved in the production of sponge iron. In addition, the company plans to develop two pellet plants at Donimalai and Bacheli.
The company seeks to augment its resources and reserves, improve its infrastructure and enhance its technology through joint ventures and commercial tie-ups. In furtherance of this objective, the company has formed a joint venture with J&K Minerals Limited for a magnesite mine in Panthal, Jammu; taken a 51% interest in a joint venture with Chhattisgarh Mineral Development Corporation Limited for the development of certain iron ore deposits; entered into an MoU between the Ministry of Railways, the Government of Chhattisgarh and Steel Authority of India Limited for the construction of a new broad gauge rail line between Dalli Rajhara, Rowghat and Jagdalpur; entered into a memorandum of understanding, with Steel Authority of India Limited ("SAIL"), Rashtriya Ispat Nigam Limited ("RINL"), Coal India Limited ("CIL"), and NTPC Limited ("NTPC") for securing overseas supplies of coking coal and thermal coal; and entered into a MoU, dated January 22, 2010, with Tata Steel Limited to explore the possibility of acquisition, exploration and development of mines, extraction and processing of minerals, setting up integrated steel plants and other businesses of mutual interest.
In addition NMDC entered into an agreement with Arcellor Mittal for mines abroad. When two large Indian private sector steel groups find NMDC attractive enough as business partner and also did put in money to buy its shares, Indian media and stock-analysts gave a thumbs down to the company. Only time will tell who is wrong, though it does not require much introspection.
The NMDC follow-on offer had been criticized as over-priced by almost the entire market intermediaries including media analysts. When the issue got subscribed 1.25 times, the critics did not fail to point out that it was the largest cheque from the nationalized insurance giant LIC which had bailed the disinvestment out. The fact that retail investors were not seen much excited was rubbed in again and again.
First take a look at the facts. The FPO received bids for over 41.38 crore shares, 1.25 times more than 33.22 crore shares on offer, as per the data available with the National Stock Exchange. This FPO was the third in 2010 by the UPA government under its divestment plan.
Earlier, NTPC follow-on offer was subscribed 1.29 times, while the REC issue was subscribed over three times on the final day. In case of NMDC issue, the portion reserved for qualified institutional buyers was subscribed 2.28 times, while the non-institutional and retail investors each subscribed to 22 per cent of the shares reserved for them. Among the major bidders had been state-run LIC, SBI, UTI and Canara Bank and also foreign funds like Wellington, Credit Suisse and Macquarie. Most of the bids came in at the lower end of the price band of rs 300-350 a share. But the money raised even at the lower end of the band had been a staggering Rs 9,900 crore. That the state-owned miner is not exactly as untouchable as many wanted us to believe could be gauged from the fact that steel majors Tata Steel and ArcelorMittal were believed to have put in bids for the issue.
The government divested 8.38 per cent of its 98.38 per cent holding in NMDC. It reserved 35 per cent of the issue for retail buyers, while 50 per cent was reserved for QIBs, which include FIIs and mutual funds. The share offer price was at a discount to the market price of around Rs 400. But from the outset there had been a strong lobby working against the success of the issue.
First behind the scene there had been a group of Investment Banks who feel that they only could lead to the success of an issue. Unfortunately, the government followed its standard procedure of selecting the bankers — being the government it could not do anything else. The bidding process saw new investment bankers winning the mandate. This created two problems. First the bankers selected were inexperienced, therefore, lacked contact and innovativeness. They had an ally in the lack of experience of the government officials managing the process. As a result the entire communication process of the companies selling stake was unimaginative.
Second and no less important was the losers in the bidding process, investment banks with the experience and contact among the market intermediaries, like analysts, brokers and media, feeding negative stories on the government divestment. One can easily attack the government since the officials are always defensive. Hence the entire marketing effort of the PSU shares started on a weak note. NMDC was a bigger casualty since the amount raised was larger, in fact one among the largest in the
country.
Incorporated in the year 1958 as a Government of India fully owned public enterprise, NMDC is under the administrative control of the Ministry of Steel, Government of India. Since inception, it is involved in the exploration of wide range of minerals including iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, beach sands etc.
NMDC, being India’s single largest iron ore producer and exporter, is presently producing about 30 million tonnes of iron ore from 3 fully mechanized mines viz, Bailadila Deposit-14/11C, Bailadila Deposit-5, 10/11A (Chhattisgarh State) and Donimalai Iron Ore Mines (Karnataka State) which are awarded ISO 9001-2000 certification.
In addition to its Iron ore operations, the company also operates a diamond mine at Panna (Madhya Pradesh), one of the largest diamond mines in Asia, and owns a wind power facility with seven towers in the State of
In recognition to the company’s growing status and consistent excellent performance, the company has been categorized by the Department of Public Enterprises as “Navratna” Public Sector Enterprise in 2008.
It is presently producing about 22 million tonnes of iron ore from its Bailadila sector mines and 7 million tonnes from Donimalai sector mines. The company plans to start value-added projects such as steel production and has signed an MoU with the state government of Chhattisgarh to develop a steel plant with a capacity of 3 mtpa at Jagdalpur.
The company also has plans to develop a steel plant in Karnataka. NMDC is also investing in development of renewable energy resources as an environment friendly investment. Moreover, NMDC views that it will be sharpening its focus on mining of coal and fertilizer raw materials such as potash and rock phosphate to help India achieve energy and fertilizer security.
NMDC has large reserves of high grade iron ore and therefore commands premium pricing and enjoys customer loyalty. It is the largest producer of iron ore in India by volume.
It produced 28.5 million tonnes of iron ore in Fiscal 2009, putting it in a strong negotiating position for purposes of the sale of its iron ore products.The key factors contributing to the company's ability to lower its costs of production include the mechanization of its mines, its focus on continually reducing mining costs and seeking operational efficiency improvements, including logistics, and its access to a relatively large and inexpensive labour and talent pool in India.
The company’s new expansion projects are adjacent to its existing mines, enabling the company to utilize a portion of its existing infrastructure for new production.
NMDC with its large and dedicated R&D center at Hyderabad has been undertaking technology development projects related to mineral processing, flow sheet development, mineralogical studies and project development. Moreover, it has a strong in-house capability to undertake exploration to expand its reserves as well as to diversify its production.
Under Rana Som’s leadership the company intends to expand its exploration activities to acquire more prospecting licenses and mining leases in India and abroad, including for non-ferrous minerals. There had been several proposals with NMDC to prospect mines abroad — a large one in Brazil for example.
In this case the owners of the mineral deposit approached NMDC on its own and sought partnership. An interesting aspect of NMDC effort to acquire mine equities abroad is to take private sector as partner so that due diligence is thorough. When the prospective seller maintains stake one can assume the property to be of good value.
A question that analysts posed during the NMDC offer was why the miner did not contain itself to remain as a merchant miner. The underlying assumption is the profitability of mines as compared to the same from steel making. What the question winked at is the issue of national development. Can a responsible national mining company just be content with mining and selling the assets to any buyer even outside the country? To a get-rich-quick stock market analyst this is the only criterion. So the judgment was pronounced even before the issue announced its pricing. NMDC is an overpriced issue, not to be touched.
Discounted in the process had been the fact that NMDC has signed an MoU with the state government of Chhattisgarh to develop a steel plant with a capacity of 3 mtpa at Jagdalpur, and also has plans to develop a steel plant in Karnataka. Furthermore, the company expects to complete its acquisition of Sponge Iron India Limited in early 2010, a company involved in the production of sponge iron. In addition, the company plans to develop two pellet plants at Donimalai and Bacheli.
The company seeks to augment its resources and reserves, improve its infrastructure and enhance its technology through joint ventures and commercial tie-ups. In furtherance of this objective, the company has formed a joint venture with J&K Minerals Limited for a magnesite mine in Panthal, Jammu; taken a 51% interest in a joint venture with Chhattisgarh Mineral Development Corporation Limited for the development of certain iron ore deposits; entered into an MoU between the Ministry of Railways, the Government of Chhattisgarh and Steel Authority of India Limited for the construction of a new broad gauge rail line between Dalli Rajhara, Rowghat and Jagdalpur; entered into a memorandum of understanding, with Steel Authority of India Limited ("SAIL"), Rashtriya Ispat Nigam Limited ("RINL"), Coal India Limited ("CIL"), and NTPC Limited ("NTPC") for securing overseas supplies of coking coal and thermal coal; and entered into a MoU, dated January 22, 2010, with Tata Steel Limited to explore the possibility of acquisition, exploration and development of mines, extraction and processing of minerals, setting up integrated steel plants and other businesses of mutual interest.
In addition NMDC entered into an agreement with Arcellor Mittal for mines abroad. When two large Indian private sector steel groups find NMDC attractive enough as business partner and also did put in money to buy its shares, Indian media and stock-analysts gave a thumbs down to the company. Only time will tell who is wrong, though it does not require much introspection.
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