Government to sell 8.38 per cent stake in NMDC

National Mineral Development Corp, India's biggest iron ore miner, said today that the government would divest 8.38 per cent of its stake in the company through a follow-on public offer by the end of March, seeking to raise an estimated Rs23,000 crore ($3 billion). The government holds over 98 per cent of the company's stock.

The government will take the auction route for the sale of NMDC shares to foreign institutional investors (FIIs), financial institutions and high net worth individuals, the company said in a statement from Mumbai.

Retail investors will be kept out of the auction process, but will be allotted shares at a floor price to be fixed before the auction. So, if the auction price is much higher than the floor price, retail investors will still get their quota at the pre-decided floor price.

The company, which is under the administrative control of the ministry of steel, will need more than Rs14,000 crore over the next three years to fund its expansion plans. This is in addition to the Rs12,000 crore which it has as cash surplus.

The government obviously wants to take advantage of the increasingly buoyant market to push through its disinvestment programme. National Thermal Power Corp, India's biggest electricity producer, and power-sector lender Rural Electrification Corp are among those planning to sell more of the government's stake in the next few months, while hydropower firm Satluj Jal Vidyut is preparing for an initial public offer.