On the eve of the opening of the bids, stock price of state-owned NMDC was corrected 6.2% on the Bombay Stock Exchange (BSE) on Tuesday. This has effectively reduced the discount to the price band of Rs 300-350 set by empowered group of ministers (EGoM) on Monday. At close of the day, the price band was at a discount of 20.1-6.8% over the market price.

?The market is factoring in the price band the company has announced,? says Deven Choksey, MD of KR Choksey Securities. The stock opened the day at Rs 379 on BSE before touching the intra-day high and low of Rs 385 and Rs 365, respectively, during the trading session. It finally closed at the 17-week low of Rs 375.65.

The deep discount on the FPO would attract retail investors as well as institutional and foreign investors, chairman and managing rirector Rana Som said on Tuesday. The government is hoping that NMDC divestment will revive investor interest in stake sales. Responses were not encouraging enough during the public offers of NTPC and REC. The NMDC offer opens on Wednesday and closes on March 12. Disinvestment secretary Sumit Bose said the NMDC FPO is different from those of NTPC and REC. ?We are offering a price band in this case as against the French auction procedure adopted in cases of NTPC and REC,? he said.

NMDC, which enters the capital market with a further offer of 33.22 crore equity shares, will offer an upfront 5% discount to retail investors over the issue price. The latter will be discovered through the traditional book building process. The follow-on offer is expected to collect anywhere between Rs 9,800 croe and Rs 11,425 crore depending on the price discovered.

Currently, the government is holding 98.38% and the rest is held by domestic and overseas institutional investors and other corporate bodies. Post issue, the government?s stake will come down to 90.77%.

Many brokerage firms have hinted at underlying valuation of Rs 240-275 for the company, which is lower than the offer price. If the price stays at these levels, retail investors are expected to check in, feels a certain section of the market community. ?If price goes down further from these levels, we might not witness much retail participation,? Ambareesh Baliga, VP, Karvy Stock Broking, said.

The government expects to raise a maximum of Rs 11,700 crore at the upper end of the price band.