NMDC base price fixed at R147 a share, Rs 5,430 crore eyed from 10% stake sale

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SummaryBase price a 7.5% discount to current market price; analysts see another bailout by LIC & PSBs.

The government on Tuesday announced that it will divest 10% stake in NMDC at Rs 147 per share, which is around 7.5% discount to the prevailing market price. The stake sale, which is expected to fetch the government around Rs 5,430 crore, will be done on Wednesday through the offer for sale route.

While the government has chosen to offer a slight discount to the market price, analysts say that, once again, it would be the public sector banks and LIC that would subscribe to the offer that comprises 39.65 crore shares.

The government currently holds 90 % stake in NMDC after it offloaded its 8.38% holding of then 98.38 % stake in the company in March 2010.

At the current market price, NMDC is trading at about 9.4 times its September quarter annualised earnings. However, at R147 per share, the P/E multiple works out to be 8.7, a discount of 7% from the one-year forward valuations demanded at Tuesday's closing price.

Incidentally, at R187.90, Sesa Goa is trading a tad higher, though historically, it has offered EPS almost 1.5 times to two times the EPS offered by NMDC.

The OFS for NMDC would be the second this financial year after Hindustan Copper, which helped the government raise around R808 crore by diluting 5.58% stake. It was salvaged entirely by public sector banks and LIC even though the shares were offered at more than 40% discount to the then prevailing market price.

While the exact quantum of bids could not be ascertained, sources say LIC was the largest bidder at more than R350 crore. The country's largest lender, State Bank of India, is believed to have placed a bid of more than R100 crore.

Further, other state-owned banks like Central Bank of India, Union Bank of India and Punjab National Bank are believed to have put in bids in the range of R40-50 crore each.

The government plans to collect R30,000 crore through disinvestments this year.

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