Demerged entity will be commissioned as steel plant by July 2021: Sumit Deb, CMD, NMDC

Sumit Deb, Chairman and Managing Director (CMD), NMDC, talks about the quarter results and COVID’s impact on it, price rise, demerger of the Nagarnar steel plant and Donimalai mines during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: It has been a very challenging quarter and impact of COVID was seen in it. Can you brief us about the realizations during the quarter and what is the future outlook on it?

A: There was a drastic fall in our turnover, I mean, our turnover dropped around 41% and there is a fall in realizations as well. Even production was greatly impacted as it fell 28%. Putting everything together, as expected the quarter has been impacted by the pandemic. It seems that we have made up, if you have a look at the production of June and July then we had made it up to a great extent in these months. Going forward I think that we will make up the total quantity that we have lost – around 1.8 million tonnes due to the pandemic.

Q: There has been a price hike in the quarter and domestic prices are quite low yet as compared to international prices. Do you think that there is further headroom for price rise, if yes, then in what quantum?

A: NMDC’s normal supplies and customer base are primarily domestic customers. We also have an intention to supply to the domestic customer. Our exports are barely below 10% and are very limited in accordance with the government’s policy and approvals. Otherwise, we focus on supplying to the domestic industry and customers. And to support them, the domestic industry and sponge-iron sector, we have reduced our prices by around Rs 900 over a period of time. With an increase in the market, slight uptrend up-tick is visible in the steel market and so far, we have made up with to a great extent. If the market conditions remain the same then we will act according to the market, the domestic requirement, production availability, supply and demand.

Q: The board has decided on the demerger of the Nagarnar steel plant. What would be the deadline for it and sort of value unlocking is likely to happen for the shareholders?

A: The demerged entity of steel plant has been created and its shareholding is going to be a mirror shareholding. A mirror shareholding has been created of whatsoever is available with NMDC and it is a demerged entity. NMDC has spent Rs 16,000 crore in the steel plant and the balance position will be funded via debt, which will be created in that demerged entity

Q: What is the outlook for the demerged entity and what are the valuations? Steel is high-capital intensive businesses, so tell us about the way in which the balance sheet will be strengthened after the demerger? 

A: When it comes to the demerged entity then we have a target to commission the steel plant. It will be done probably by June-July 2021. Going forward will look at what props up.

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Q: Center and the state have decided to resume operations in Donimalai mines with 22.5% royalty instead of 15%. How much impact do you foresee on your numbers?

A: Domimalai mines have a capacity of 7 million tonnes but it has been shut since last one and a half year. We were discussing things with the state government. The centre was also involved in this discussion process. Going forward, the volumes that will be created will offset the premiums if there is an increase in the volume, which is a very positive thing. Obviously, there is going to be some impact with regard to what you are saying. These numbers are not the final one as a committee will make a decision on it.