An Inter-Ministerial Group has asked NMDC Ltd to ‘pick up’ 10 per cent in its yet to be demerged Nagarnar steel plant and stay on board because of the “goodwill” the PSU iron-ore miner enjoys in the Maoist-affected Bastar region.
Nagarnar, located on the Odisha–Chhattisgarh border, is known to be a Left-wing-extremism affected area.
NMDC will be “offered” 10 per cent stake in the steel plant at the “same discovered price in competitive bidding”. This means, NMDC will pay the same price as that of the the strategic partner – a market determined price – to retain 10 per cent stake in the plant and stay on board in the project.
The Centre will now off-load 50.79 per cent stake in the steel unit (post its demerger and listing) and not the previously decided 60.79 per cent. The transfer of management and control to the strategic partner will be done following a “two-stage competitive bidding process”.
According to the minutes of a meeting of the inter-ministerial group held on September 19, and accessed by businessline, NMDC’s goodwill and presence in these areas are likely to improve the assurance of raw material supply NMDC’s steel plant (to be demerged into a separate unit called NSL) and assist “smooth operations by strategic partners.”
The decision to keep a “minority stake” with NMDC was suggested after discussion with the Secretary, Ministry of Steel with Government of Chhattigarh.
“ ...it was felt that continued shareholding of NMDC in the steel plant may be helpful in view of NMDC’s goodwill in the LWE affected mining areas of Bastar,” the minutes read.
Modification of EoI
Accordingly, the transaction advisors for the demerger, SBI Capital Markets pointed out that “informal feedback of potential investors” was also in favour in NMDC keeping a minority stake in the plant.
However, they suggested that the stake is “restricted to 10 per cent” to “facilitate upfront majority to the strategic partner” given “uncertainties of the open offer” on the extent of public shareholding post such an offer.
In line with the feedback, “modification to the Expression of Interest” was proposed too.