MCA Approves Demerger of NMDC Steel from NMDC

Ministry of Corporate Affairs approves demerger of NMDC Steel from NMDC.

Steel giants such as ArcelorMittal, POSCO, Jindal Steel and JSW Steel are preparing to bid for the steel fabrication facilities of NMDC, India’s largest iron ore producer, with the Ministry of Corporate Affairs (MCA) approved by NMDC amid reports demerger of NMDC Steel from NMDC.

In a communiqué to the exchange on October 11, the NMDC said it had received the MCA’s order on Tuesday and was complying with the requirements envisaged in the ministry’s order.

NMDC is a state-owned entity under the Ministry of Iron and Steel, mainly engaged in exploring iron ore, copper, phosphate rock, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite and beach sands.

As part of a plan to diversify into value-added products, NMDC listed NMDC Steel in January 2015, which manufactures and trades stainless steel, silicon, special steel and other related inputs.

NMDC’s special tool for entering the steel business had envisaged the establishment of a Greenfield integrated steel plant with a capacity of 3 million tonnes per annum in Nagarnar, Chhattisgarh, with an investment of over Rs 23,000 crore. This is part of the Indian government’s roadmap to increase the country’s steel production to 300 million tonnes a year by 2025.

NMDC has made it clear in its Vision 2025 that its role will be that of a developer of steel plants and that investors will be invited to commission and operate these plants in due course. So, the iron ore producer devised a plan to add more value to its stakeholders by demerging the steel business into a separate company and inviting investors.

In October 2020, the Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, approved in principle the divestment of the steel business from NMDC and through the sale of the government’s entire stake in NMDC Steel to a strategic buyer to strategically divest the steel business. Currently, the Government of India holds a 60.79% stake in NMDC.

NMDC’s plan to demerge NMDC Steel from NMDC has been approved by shareholders and lenders over the past few months, with NMDC shareholders taking all equity in NMDC Steel. Shares of NMDC Steel will then be listed on the stock exchange.

As part of the plan, assets of Rs 18,650 crore and liabilities of Rs 1,602 crore will be spun off to NMDC Steel. While the NMDC Board of Directors approved the demerger in July 2021, the Ministry of Steel approved the demerger of NMDC Steel in March 2022.

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