NMDC shares jump nearly 7% in two sessions amid demerger news – Check what brokerages say about stock

A day after its demerger news, NMDC shares have surged around 3 per cent to Rs 176.9 per share on the BSE intraday on Wednesday. The scrip has jumped nearly 7 per cent since the announcement of demerger news yesterday.

NMDC in a filing to exchanges on Tuesday said, “The Board of Directors of NMDC Limited, at its meeting held today, July 13, 2021, has approved the Scheme of Arrangement for Demerger between NMDC Limited (Demerged Company) and NMDC Steel Limited (Resulting Company).”  

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It further said that the scheme is subject to necessary statutory and regulatory approvals including the approval of the market regulator Securities and Exchange Board of India, stock exchanges, Ministry of Corporate Affairs, Government of India and respective shareholders and creditors.

In this regard, Citi maintains a Neutral call on NMDC after the company’s board approved the demerger of the steel plant. It says, demerger could help unlock value for the iron ore business. It said, NMDC trades in line with global peers at 4x 1 year forward EV/EBITDA on consensus and a target of Rs 195 per share.

Similarly, JP Morgan also has a Neutral rating on NMDC and raises a target of Rs 210 reflects Rs 36/ per share of steel plant value, at a 50 per cent discount to invested value. The brokerage said, the demerger news is a positive as it limits liability to a company from steel plant losses.

At around 11:15 am, the scrip is trading near 1.5 per cent to Rs 174.20 per share, which is at a day’s high level, on the BSE, as compared to a 0.17 per cent rise in the S&P BSE Sensex. The counter in the last three months has soared over 25 per cent from Rs 141.3 per share on the BSE.

NMDC limited is a government company and is engaged in the exploration of wide range of minerals including iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, and beach sands.