NMDC had informed on 01-01-19 that the meeting of the Board of Directors of the Company is scheduled on 10-11-29/01/2019,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 Buyback of not exceeding 13,12,43,809 (Thirteen Crore Twelve Lakh Forty Three Thousand Eight Hundred Nine) fully paid-up equity shares of face value of Re. 1 /- each at a price of Rs. 105 (Rupees One Hundred Five only) per equity share for an aggregate consideration not exceeding Rs. 1378,05,99,945 (Rupees One Thousand Three Hundred Seventy Eight Crore Five Lakh Ninety Nine Thousand Nine Hundred and Forty Five only).
NMDC Buyback Offer Size represents 5.00% and 5.05% of the aggregate of the fully paid-up equity share capital and free reserves as per the audited standalone and consolidated financial statements of the Company, respectively for the financial year ended March 31, 2020. 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: Updates
Issue date : 17-12-20 :31-12-20
NMDC Entitlement 23.4%
NMDC Buyback 2020 & 2019
|Buy Back Price||105||98|
|BuyBack Size- Shares||131,243,809||102,040,815|
|BuyBack Size- Rs. Cr||1378.06||1000.00|
|Shares reserved- Retail||19,686,571||15,306,122|
|% Premium on MP||11.70%||3.43%|
|% Buyback / Equity||4.29%||3.23%|
|MP befo announcement||83|
|MP aft announcement||89|
|MP befo BM||94||94.75|
|Tot No.of shares||3,061,849,659||3,163,890,474|
|Equity Capital- cr||306.18||316.39|
|FV of Share in Rs.||1||1|
|Buy Back Issue date||17-12:31-12-20||13-02:27-02-19|
|Shares on RD||83431297||76,653,540|
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. 3) Estimates from earlier Buybacks
Based on approximations indicated above, t and considering a moderate tendering ratio, under normal circumstances NMDC Buyback could have an acceptance ratio of 35-55 %. Any uptick in share price generally increases this ratio.
Return Scenarios 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 uncertainties related to COVID 19. We have depicted estimated Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.
|Absolute Returns %|
|MP Aft Buybk|
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 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.
- Besides iron ore, it is also involved in the exploration of a wide range of minerals like copper, rock phosphate, lime stone, dolomite and gypsum.
- NMDC, as part of its diversification, value addition and forward integration program has been involved in setting up a 3 MTPA capacity greenfield Integrated Steel Plant in Chhattisgarh state with an estimated outlay of Rs 20000 crore. The Board of Directors of the company at their meeting held on 27th August 2020, accorded approval to the proposal to demerge its NMDC Iron & Steel Plant (NISP), Nagarnar, Chhattisgarh.
NMDC : Price Trend, Summary of Financials
Assessment: NMDC Buyback
- NMDC share has been under pressure due to ongoing tussle with Karnataka Govt. on renewal of its Donimalai mine. This issue may be nearing resoolution. Donimalai mines accounts for about 18% of the NMDC’s production. This along with proposed sale of steel plant may help the stock price in coming months.
- NMDC posted good results for Q2FY21 after reporting muted numbers for Q1FY21 due to lockdown impact. It reported ~10 per cent rise in consolidated net profit at Rs 772.53 crore for September quarter 2020-21, mainly on account of lower expenses.
- iron ore prices have been ruling firrm in last few months. IN OCTOBER BEGINNING, NMDC had increased the price of high grade iron ore (lumps) by Rs 400 to Rs 3,000 per tonne and also hiked the price of iron ore fines, which are inferior grade ore, by Rs 400 to Rs 2,760 per tonne. Further on Nov 4, NMDC increased lump ore prices by 4.35% to Rs 3600 per tonne from Rs 3450 per tonne in October 2020. Prices of fines were hiked by 4.75% to Rs 3,310 per tonne in November 2020 as against Rs 3,160 per tonne in October.
- NMDC stoock price has gone up in anticipation of buyback.
- Buyback may be only moderately attractive to an arbitrage investor due to run up in price. There are however factors that may support NMDC price. on flip side the PSU tag does not carry much weight on stock markets.
- On its part, the Govt as far as buyback is concerned has done what was best possible in these circumstances and so overall view is slighlly positive.
- The last two buybacks of NMDC ended with 100% acceptance for retail as stock price rallied close to buyback price. Will history repeat ?
- NMDC is in F&O which may curb some volatility.
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.