* Largest domestic iron ore producer with 1.2 bn ton reserves: NMDC is the
largest iron ore producer by volume in India, with total production of 28.5mn
tons in FY09. Its principal operations include three iron ore mining complexes
at Kirandul and Bacheli in the State of Chhattisgarh, and Donimalai in the
State of Karnataka. The company has access to 1.2bn ton of high grade iron
ore reserves, which predominantly have more than 64% Fe content.
* Focus primarily on domestic market: NMDC sells most of its high grade iron
ore production to the Indian steel market, primarily due to long-term sales
agreements. In FY09, exports (primarily to Japan and South Korea)
contributed c.15% to NMDC’s consolidated total sales volume. For FY09,
c.92% of the company's iron ore sales volume is based on long-term contracts
with customers, both domestic and international. The remaining 8% is sold on
the spot market at negotiated prices.
* Ramping up iron ore capacity to 50 mn ton; expanding into steel: NMDC’s
current approved mining capacity stands at 30MT, which it plans to expand to
50MT over the next 3-4 years, via new mines. NMDC has signed an MOU with
the state government of Chhattisgarh to set up a steel plant with 3 mtpa
capacity at Jagdalpur. Also, in July 2007, the Ministry of Coal allotted the
Shahpur East coal block of 63.4mn tons and Shahpur West coal block of
52.7mn tons in the State of Madhya Pradesh to the company. Dominant grade
is C and D, and to some extent E.
* Follow on public offer by GoI; price band Rs300-350: The current issue is
an offer for sale of 332mn equity shares, or 8.38% of the outstanding equity
share capital of the company, by the GoI as a part of the decision to divest
part of its shareholding in the company. This being an offer for sale, NMDC
shall not receive any proceeds and all the proceeds will be received by GoI,
the selling shareholder. The company has announced a price band of Rs300-
350 for the issue. At the lower end of Rs300/share the company will trade at
25x P/E FY11 Bloomberg consensus estimates. |
