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Wednesday, December 9, 2009

NMDC Said to Plan $3 Bn Sale of State-Held Stock

India’s government plans to sell as much as 140 billion rupees ($3 billion) of shares in NMDC Ltd., the nation’s biggest iron-ore producer, as part of a sell-off of state assets, said two people familiar with the proceedings.

A committee of ministers will start selecting arrangers for the sale this week after cabinet approved plans to divest an 8.38 percent stake, said the people, who declined to be identified because the development has yet to be made public. The government needs to reduce its 98.38 percent holding as part of a plan to cut ownership of profitable state-run companies to 90 percent. NMDC’s shares rose the most in a month.

The best performance in India’s benchmark stock index in 18 years is making it easier for Prime Minister Manmohan Singh to raise funds to build roads, ports, power projects and telephone networks. The government may sell shares in as many as 60 companies including the nation’s biggest power producer, second- largest steelmaker and top-ranked coal company.

“There are too few shares in the market now and everybody wants a piece of the company because it has an excellent model,” said Sanjay Makhija, head of institutional sales at Fortune Financial Services India Ltd. “It’s India’s lowest-cost producer and has reserves to expand production significantly.”

NMDC shares gained as much as 7.6 percent, the most since Nov. 10, and traded at 426.50 rupees, up 4.7 percent, as of 12:09 p.m. in Mumbai. The shares have more than doubled this year, compared with a 79 percent gain in the Bombay Stock Exchange’s benchmark Sensitive Index.

Damping Inflation

India plans to spend $8.95 billion in the year ending March 31 to improve infrastructure and boost economic growth. The government yesterday sought lawmakers’ approval to spend an extra $6.6 billion, in part to subsidize food and fertilizers to damp quickening inflation.

The government resumed asset sales after Singh won a second term without support from his former communist allies, who had foiled previous attempts. Singh’s administration aims to sell shares in NTPC Ltd, India’s biggest power producer, Rural Electrification Corp. and Satluj Jal Vidyut Nigam Ltd., an electricity generator in the northern state of Himachal Pradesh, Power Ministry Secretary H.S Brahma said on Dec. 2.

“There’s appetite in the market,” said Munesh Khanna, managing director of investment banking at Mumbai-based brokerage Centrum Broking Pvt. “Most bankers will pitch for the government stake-sale business.”

NMDC expects to double production capacity to 50 million metric tons by March 2015, according to the company’s Web site. NMDC sold 22.6 million tons of iron ore in India and exported 3.9 million tons in the last fiscal year.

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