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Shares of NMDC have lost 3 per cent since Friday despite the Government reducing export tax on iron ore exported by the company.
On October 18, the government reduced the export tax on iron ore to Japanese and Korean mills under long term agreement to 10 per cent from 30 per cent earlier. It also approved the renewal of agreement for supplying up to 16.5 million tonnes (MT) of high grade iron ore to steel plants in Japan and South Korea over three years till March 2018.
On Monday, the company's shares closed down 2 per cent.
The quantities covered under the agreement will be in the range of 3.8 to 5.5m tpa and will be supplied from the Bailadila mines of the NMDC and the contract will be executed by Metals and Minerals Trading Corporation of India Limited.
A positive, says IDFC Securities
IDFC Securities pointed out that the sharp cut in export duty comes as a positive and will mitigate differential net realisation between domestic and export realisation. However, it is unlikely to make any significant impact on overall profitability.
"Our calculation suggests that at current domestic prices and royalty of 15 per cent, ex-mine realisation for domestic sales will be still at a premium of Rs 764 per tonne for fines and Rs 1,339 per tonne for lumps to exports (even after factoring in the renewed export duty structure at 10 per cent both for fines/lumps)," it said.
At 12.35 pm, the NMDC stock was down 1.59 per cent or Rs 1.65 at Rs 102 on the BSE.
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