In what seems to be a desperate measure by the Department of Disinvestment in the finance ministry, the Centre has decided to sell 10 per cent stake held in public sector National Mineral Development Corporation (NMDC), the company informed stock exchanges. The government will sell its stake in the company through offer for sale method via stock exchanges, the announcement said.
Given the company’s market capitalisation of Rs 74,219 crore and with just 10 per cent stake in the company held by the public, the divestment is pegged at Rs 7,421 crore or $1.3 billion.
Allowing promoters to dilute stake through stock exchanges, early this year, the Securities and Exchange Board of India had offered a separate window to be provided for the sale to public participants. “In order to facilitate promoters to dilute/offload their holding in listed companies in a transparent manner with wider participation, it has been decided to allow the offer for sale of shares by promoters of such companies through a separate window provided by the stock exchange(s),” Sebi had said in its notification in February.
Calling for merchant bankers to help the promoters sell their stake, the company has mandated that the participating investment banks should have handled and completed at least one domestic equity issue (Initial Public Offering or Further Public Offering or OFS) of the size of Rs. 1000 crore or more during the period from April 2009 to June 2012.
The government’s decision to raise money through NMDC comes at a time when it is faced with difficulties in attracting investors for the offer for sale of Oil and Natural Gas Corporation of India. State-run life insurer Life Insurance Corporation of India had bailed out ONGC’s issue by buying huge lots from the window. With lacklustre capital markets, very few companies have tried to test waters by launching a deal. Interestingly, in 2009, LIC had bailed out the initial public offering of NMDC by investing more than Rs 3,000 crore.
Earlier, Samvardhana Motherson Finance Ltd, the holding company of the automotive component manufacturing group Samvardhana Motherson, saw its issue subscribed just 23 per cent or less than a quarter. Prior to that, Goodwill Hospitals withdrew its IPO in January and Plastene India did the same in May.
The company’s stock price rose 2.21 per cent to close at Rs 187.20 per share on a Bombay Stock Exchange.
(Edited by Prem Udayabhanu)