NMDC had informed on 01-01-19 that the meeting of the Board of Directors of the Company is scheduled on 08/01/2019,inter alia, to consider and approve to consider the proposal for buyback of the fully paid-up equity shares of the Company. NMDC buyback proposal approved by its board comprises buyback of not exceeding 10,20,40,815 equity shares at a price of Rs. 98 (Rupees Ninety-Eight only) per equity share for an aggregate consideration not exceeding Rs. 1,000 Crore (Rupees One Thousand Crore only). NMDC Buyback represents approximately 3.23% of the total paid-up equity capital of the Company and is on a proportionate basis under “Tender Offer” route. The Record date for NMDC Buyback is 18-01-2019.
NMDC Buyback 2018 & 2016
|MP a day befo||148.5|
|Buy Back Type||Tender Offer||Tender Offer|
|Buy Back Price||98||94|
|MP bef BM||94.75|
|MP aft BM|
|% Premium on MP||3.43%|
|BuyBack in Rs. Crore||1000.00||7527.76|
|Buy Back ( Shares)||102,040,815||800,825,526|
|Equity Capital in cr||316.39||396.47|
|Tot No. of shares||3,163,890,474||3,964,716,000|
|FV in Rs.||1||1|
|Govt Holding in co.||72.43||80%|
|MO on RD|
|Shrs reserved for Retail||15,306,122||120,123,829|
|Shares on RD Buyback||41,803,192|
|Buyback Issue Date||19-09:30-09-18|
|Shrholders who bid|
|Shfs Tendered - retail||4993|
NMDC Buyback: Estimate of Acceptance Ratio:
This framework is based on estimation of shareholding of NMDC shareholders who hold around 2000 number of shares. To this we have added estimates for
1) Few additional purchase of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Purchase of Shares by Arbitrage investors.
Based on approximations indicated above, the entitlement ratio for NMDC Gears Buyback is expected to be in region of 15-23%. Considering a moderate tendering ratio, under normal circumstances NMDC Buyback could have an acceptance ratio of 30-45 % or even 50%.
Estimated Returns for NMDC Buyback
The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Percentage Acceptance Ratio and Price Post Buyback. Investors may kept in mind that stock markets are quite volatile at this juncture and there are many political and other uncertainties related to international markets. We have depicted estimated Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.
|A) Abs Returns|
|Pr aft buybk|
NMDC Buyback price has been disappointing and is at a very low premium to existing market price. This post is purely for informative and educational purpose and is in no way suggestive of taking any position in the counter. Profit or Loss in any buy sell operation in stocks is associated with significant risk of capital loss. For more on Buyback Benefits and other issues please refer the earlier Posts.
NMDC: Bonus and Dividends
Bonus in 2013. 1:2 and Split 1:10
Dividends: in FY17-18, NMDC declared equity dividend of 430% amounting to Rs 1360.48 crore.
- NMDC Limited,(National Mineral Development Corporation), is an CPSE which is into mineral production and is under the administrative control of the Ministry of Steel, GOI.
- NMDC is involved in the exploration of iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite etc.
- NMDC is India’s largest iron ore producer and exports iron ore from 3 fully mechanized mines in Chhattisgarh and Karnataka. It also operates ta diamond mine at Panna in Madhya Pradesh
- NMDC, as part of its diversification, value addition and forward integration program is setting up a 3 MTPA capacity greenfield Integrated Steel Plant in Chhattisgarh state with an estimated outlay of Rs 20000 crore.
NMDC : Price Trend, Summary of Financials
Market Cap (in ₹ Cr.)
|CMP in Rs.||94.8|
|Face Valle (Rs.)||1|
|Price To Earnings P/E||8.56|
|BV per share (₹)||82.14|
|Price To Books (P/B) Ratio||1.15|
|Total Debt to Equity (D/E) Ratio||0.02|
Assessment: NMDC Buyback
- NMDC share has been under pressure due to ongoing tussle with Karnataka Govt. on renewal of its Donimalai mine. NMDC has not agreed to Karnataka govt pre-condition to share of 80% revenue for renewing mining leases of Donimalal and has closed the mines and matter is before the court.
- Due to combination of internal and external factors, NMDC’s
iron ore prices have witnessed a fall as depicted below
|Price in Rs. Per Ton|
|Announcement Dt||Lump Ore||Fines|
- NMDC for H1FY19 reported subdued sales volumes of 13.5 MT, down 22.6% YoY The company reported revenues of Rs. 4859.9 crore, down 7.7% YoY. The H1FY19 EBITDA was INR 2683.3 crore vs. H1FY18 which stood at Rs. 2697.8 crore
- Though NMDC stock has corrected considerably, it cannot be ruled ou that the stock may continue to be under pressure.
- NMDC Buyback is not attractive to an arbitrage investor unless the price corrects significantly from present Levels. The share buy back price announced is much below expectations and stock is likely to move down tomorrow as announcement was made after market hours.
- NMDC is in F&O which may curb some volatility but stock may remain under pressure.
Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk. Further the data in the post is prone to errors.