Govt to sell 50.79% in NMDC’s steel plant, invites bids

New Delhi

The Centre on Thursday invited expressions of interest (EoIs) for NMDC’s Steel Plant (NSL) at Nagarnar and offered to sell a 50.79 percent stake in the company.

As per the bidding conditions laid down by the Department of Investment and Public Asset Management (DIPAM), eligible entities can submit an EoI either independently or as a consortium member. The consortium shall have a maximum of four members, which includes one lead member.

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The bidder should have a net worth of at least ₹5,000 crore, and bids can be submitted as a consortium. Interested bidders need to submit EOIs on or before January 27, while the last date for submission of query is December 29.

The plant, with a steel making capacity of 3 million tonne per annum (mtpa), is yet to be commissioned fully. It is scheduled for completion by March 2023, and “implementation risk is lower”, the document said. The Centre’s stake in the steel plant is around 60.79 per cent. Around 10 per cent stake will be retained by the government.

The demerger of the steel plant from NMDC is yet to happen. Post demerger, the steel plant will have an authorised share capital of ₹30,00,000 and the issued, subscribed and paid-up share capital is ₹11,00,000.

Divestment Plans

The Union Cabinet in October 2020 had approved the demerger of the steel plant (set up in Chattisgarh) from NMDC and the sale of the Centre’s “entire” stake (in the steel plant) to a strategic buyer.

Earlier this year, an inter-ministerial group asked NMDC — the country’s largest iron-ore miner — to ‘pick-up’ 10 per cent in the Nargarnar steel plant and stay on board, primarily because of the “goodwill” the PSU iron-ore miner “enjoys” in the Maoist-affected Bastar region. Nagarnar located on the Odisha–Chattisgarh border is known to be a left-wing extremism-affected area.

NMDC will be “offered” 10 per cent of the stake at the steel plant as the “same discovered price in competitive bidding”. This means, the iron ore miner will now pay the same price as the strategic partner — a market determined price — to retain 10 per cent stake in the plant and stay on-board.

Capex at ₹21,000 cr

As per the bid document, nearly ₹21,000 crore has been spent towards setting up the steel plant. The project cost has been met through a mixture of debt and equity, it added. “NMDC has also executed loan agreement with State Bank of India for ₹4,476 crore, to part-finance the balance project cost,” the document stated.

“Since the majority of capex incurred so far on the plant has been funded through internal accruals, the Plant is mostly debt-free. Accordingly, buyer will get an opportunity to acquire plant with no major issues like accumulated losses,” the bid document said adding that the plant is debt free and will allow flexibility of leverage.

Listing out the benefits of the steel plant, the bid document mentions that NSL already has over 780 hectares of land in its possession, and has “all necessary approvals in place” — including environment clearances from the Ministry of Environment and Forests and the government of Chattisgarh; shall use BF-BOF (Blast Furnace-Basic Oxygen Furnace) route — which is currently considered to be a more cost-effective method of steel making due to lower energy requirement and high productivity.

Moreover, the plant has an easy availability of iron-ore. Nagarnar Steel plant is located in an iron-ore rich State and the raw material — a key one in steel making — can be sourced from NMDC owned mines in Chhattisgarh (Bailadila Deposit-14/11C, Bailadila Deposit-5, 10/11A) that have proven iron ore reserves of approximately 412.17 mt. These mines are located at a distance of approx. 123-145 km from the plant.