The government today fixed a price band of Rs 145-150 per share for its stake sale of 10% in NMDC on stock exchanges on Wednesday that could fetch up to Rs 5,947 crore.
The price band is at a discount of 3.07-6.3% at today's closing price of NMDC shares on BSE at Rs 154.75 per share.
"The price band for the NMDC issue has been fixed at Rs 145-150 per share. It will hit the markets on Wednesday," a source in the know told PTI.
The offer may fetch a maximum of Rs 5,947 crore to the exchequer as part of its Rs 30,000 crore disinvestment plan for the current fiscal, if fully-subscribed, and Rs 5,749 crore in the lower price band.
The government, which has 90% holding in the iron ore producer NMDC, plans to divest 39.65 crore shares, amounting to 10% of its equity through offer for sale, the route followed in the Hindustan Copper share sale last month.
The Cabinet Committee on Economic Affairs had on October 25 approved disinvestment of 10% government shares in NMDC. NMDC issue will be the second disinvestment by the government in this fiscal.
A Group of Ministers met today and decided on the timing and the price of the issue.
Sources said the government did not like to offer much discount for the NMDC issue, unlike 41% in the case of HCL, since iron ore miner's average trading price is more than two and a half times compared to its book value.
The fundamentals of the iron ore maker is also stronger compared to HCL and above all, it is a debt-free company, they said. In addition, NMDC is sitting on a cash pile of over Rs 20,000 crore and commands around 41% share in the domestic iron ore market.
The government had offered 41% discount for selling its 5.58% stake in HCL. However, despite that, it failed to attract the attention of the retail investors and had to be rescued at the last moment by state-own financial firms, including LIC.
In the last fiscal, NMDC had reported a net profit of Rs 7,265.39 crore and net sales of Rs 11,260.53 crore.
However, in the June-September quarter, its net profit was down nearly 15% at Rs 1,678.62 crore largely due to fall in sales and lower production.
At present, the government holds 90% stake in NMDC. As of March 31, 2012, the state-owned iron ore miner had a paid-up equity capital of Rs 396.47 crore.
For the share sale, the company had appointed five merchant bankers -- Citigroup Global Markets, Goldman Sachs (India) Securities, Enam Securities, DSP Merrill Lynch and ICICI Securities -- and ALMT Legal, Advocates & Solicitors as legal advisor.