Karnataka's iron ore duty plans weigh on NMDC; share price plunges 7%

NMDC share price: State-owned miner NMDC share price dropped up to 7.01 per cent to hit an intraday low of Rs 211.55 per share on Wednesday, December 18, 2024. 

 

The decline in NMDC share followed reports suggesting that the Karnataka government is considering an increase in the duty on iron ore. The state reportedly aims to generate approximately Rs 10,000 crore in revenue from iron ore duties this year, the report said.

 

Karnataka plays a critical role in India's iron ore sector, as it holds the largest iron ore reserves globally, accounting for 78 per cent of India's total reserves. Additionally, Karnataka is the country's leading producer of iron ore.

 

From a technical perspective, at the current juncture, Jigar S Patel, senior manager of equity research at Anand Rathi said, NMDC has formed a bearish triple-top pattern on the weekly chart near the 249 level, indicating a strong resistance zone that the stock has failed to breach multiple times. Following this pattern, the stock has witnessed a decline and is currently trading around 213, marking a significant 15 per cent correction from its recent peak. 

 

“Looking ahead, the stock is approaching a crucial support zone between 210 and 208, which has historically acted as a demand area where buying interest tends to emerge. This level is likely to play a pivotal role in halting the ongoing correction and potentially initiating a reversal, as it aligns with prior price action that demonstrated strong buying momentum in this range. Traders and investors may watch for confirmation signals around this support zone before taking fresh positions,” Patel added.

 

Meanwhile, according to a Motilal Oswal report dated December 2, India’s crude steel capacity is projected to reach 300 million tonnes (mt) by FY30-31, driving the iron ore requirement to approximately 435-445 mt. With a 16 per cent market share, NMDC is well-positioned to capitalise on this growing demand.

 

To support this growth, NMDC has outlined capital expenditure plans for various evacuation and capacity enhancement projects. These initiatives, analysts believe, are expected to improve the company’s product mix and increase its production capacity to ~100 mt by FY29-30E.

 

“We maintain ‘Buy’ rating on NMDC with a target price (TP) of Rs 280, based on 6x Sep’27E enterprise value (EV)/earnings before interest, tax, depreciation and amortisation (Ebitda),” said Motilal Oswal analysts in a note.

 

Key risks, analysts believe, include increasing competition and customer concentration. Since FY16, over 100 iron ore blocks have been auctioned, and once these mines become operational, they could significantly increase supply, intensifying competition. Additionally, NMDC's heavy reliance on a limited number of customers exposes it to potential business risks arising from this dependency.

 

NMDC financial performance

 

NMDC consolidated profit rose 16.7 per cent year-on-year (Y-o-Y) to Rs 1,195.6 crore in the September quarter of financial year 2025 (Q2FY25), from Rs 1,024.9 crore in the September quarter of financial year 2024 (Q2FY24). The rise in the profit was helped by higher income.

 

The company's total income surged 22 per cent annually to Rs 5,279.7 crore in Q2FY25, from Rs 4,335 crore in the same quarter a year ago (Q2FY24).

 

The board also approved the issuance of bonus shares in the ratio of 2:1. The Company has fixed December 27, 2024 as the ‘Record Date’ to determine the eligibility of shareholders for the bonus issue.

 

About NMDC

 

Set up in 1958, NMDC is an Indian public sector undertaking engaged in the exploration of various minerals including iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, coal, and more.

 

The 52-week high of the NMDC share is Rs 286.35 while its 52-week low is Rs 179.75 per share. 

 

At 12:30 PM, shares of NMDC were trading 5.71 per cent lower at Rs 214.50 per share. In comparison, BSE Sensex was trading 0.58 per cent lower at 80,218.08 levels.