CCEA clears demerger of Nagarnar Steel Plant from NMDC for divestment
16 October 2020
The Cabinet Committee on Economic Affairs (CCEA) has given its ‘in-principle’ approval to the demerger of Nagarnar Steel Plant (NSP) from National Minerals Development Corporation (NMDC) Ltd and strategic disinvestment of the demerged company by selling entire government stake to a strategic buyer.
NSP is a three million tonnes per annum (mtpa) integrated steel plant being set up by NMDC at Nagarnar, Bastar district, Chhattisgarh in an area of 1,980 acres at revised estimated cost of Rs23,140 crore (as of 14 July 2020). As on date NMDC has invested Rs17,186 crore in the project, out of which Rs16,662 crore is from NMDC's own funds and Rs524 crore raised from bond market.
With the approval, CCEA has amended its earlier decision, taken on 27 October 2016, to divest Nagarnar Steel Plant as a unit of NMDC.
According to the government the demerger of NSP into a separate company before its disinvestment will allow NMDC to focus on its core activities of mining. After demerger, NSP will become a separate company and the managements of NMDC and NSP shall be accountable for their respective operations and financial performance. Shareholders of NMDC will also be shareholders of the demerged company (NSP) in the proportion of their shareholding.
After the demerger, investors will have better visibility of the operations and cash flow of NMDC and NSP separately, says the release.
The demerger will also be tax neutral from the point of view of capital gains.
The CCEA has taken note that the process of demerger and divestment will be initiated in parallel and divestment of demerged company (NSP) is expected to be completed by September 2021.
NMDC is a listed CPSE under the ministry of steel and the central government has 69.65 per cent shareholding in the company.