NMDC shares fall 7% in 6 days; trades ex-date for 1:2 bonus issue

NMDC, India’s largest iron ore producer, has seen a dip in its share price over the past few days, falling by 7 per cent in six days. As of December 27, 2024, the stock was trading ex-date for the issuance of bonus shares in a 2:1 ratio. Despite opening with an upward gap at Rs 71.84 per share on the NSE, the stock faced selling pressure during the session, touching an intraday high of ₹72.10 before falling back.

Bonus shares issuance details

The NMDC Board had earlier approved the issuance of 586,12,11,700 equity shares with a face value of ₹1 each as bonus shares. These will be issued in the ratio of 2:1, meaning shareholders will receive two new shares for every one share held. The company fixed December 27, 2024, as the record date to determine eligible shareholders, with the deemed allotment date set for December 30, 2024. The bonus shares will be available for trading from December 31, 2024.

Market response and external factors

The announcement of the bonus issue coincides with a challenging period for NMDC. The company’s stock has been under pressure recently, partly due to concerns over the proposed retrospective tax under the Karnataka Mineral Tax Bill 2024. This proposed tax increase on iron ore mining could lead to a 22 per cent rise in NMDC’s costs, which is expected to negatively affect profit margins. Private miners, on the other hand, could see a 45 per cent cost increase.

Moreover, the stock's decline also reflects broader market conditions, with the BSE Sensex gaining 0.46 per cent on the same day. The pressure on NMDC shares is also attributed to the broader iron ore market dynamics, where mining-related tax hikes in Karnataka are expected to alter competitive dynamics, potentially benefiting public sector miners like NMDC.

While the bonus issue may provide a temporary boost for eligible shareholders, NMDC’s stock faces headwinds in the form of regulatory changes and market conditions. Investors should closely monitor further developments on the Karnataka tax bill and its long-term impact on the company’s earnings.