The price band for the follow-on public offering (FPO) of state-owned mining major NMDC has been fixed at Rs 300-350 per share. The empowered group of ministers (eGoM), which met in New Delhi on Monday, set an offer price, which is a 12.6-25.1% discount to the closing price on Monday. During the day, the stock price of NMDC fell 3.4% to close at Rs 400.6 on the Bombay Stock Exchange. The FPO is expected to mop up anywhere between Rs 9,800-11,425 crore, depending on the price discovered, and would rank among the biggest offerings by the government. The recent NTPC issue mopped up Rs 8,300 crore.

After the poor response for the NTPC issue, the government seems to have played it safe? opting instead for a higher discount for NMDC to make the issue successful. ?There has been a greater demand from various market participants for a higher discount than what was offered in the NTPC and REC issue? a lead manager to the issue had said on the sidelines of the announcement of the NMDC FPO. Since the government is lining up more companies as part of its stake sale process, estimated to fetch it Rs 40,000 crore next year, and given the large size of the NMDC issue, the government can?t afford to lose the confidence of investors, he added. The FPO, which opens this Wednesday, already offers retail investors an upfront 5% discount to the issue price, which will be discovered through the traditional book building process. Unlike the public issue of NTPC and REC, the government has opted for the traditional book-building route. Retail investors had stayed away from the NTPC and REC FPOs as the initial discount offered (over the market price) got narrowed down to 1.5% and 4.5% respectively with the fall in their secondary market price. While the retail portion of the NTPC FPO was subscribed just 16 %, it was 22% for REC. The institutional response to the REC issue was good with the QIB quota getting subscribed by over 5 times with foreign institutional investors such as HSBC and New Vernon showing keen interest. In the case of the NTPC FPO, QIB quota was subscribed by nearly two times mainly on account of bids worth Rs 4,000 crore from state owned LIC and State Bank of India.