Why NMDC Share Price is Falling

India's mining sector has been a cornerstone of the country's industrial growth, contributing significantly to infrastructure development and economic progress.

However, the sector has faced its share of challenges, including regulatory hurdles and global commodity price fluctuations.

NMDC, a behemoth in the iron ore mining and exploration space, has been a key player in India's mining industry. The company is a major supplier of iron ore to the domestic steel industry.

Despite its pivotal role, NMDC's stock price has encountered a downward spiral, losing 12% in the past month. This unexpected decline has raised eyebrows and prompted investors to seek answers.

Read on to know why NMDC share price is falling.

#1 Supreme Court's Royalty Decision

The Supreme Court, on 14 August 2024, granted states the authority to retrospectively collect dues on royalties and mineral-bearing land from the central government.

This decision was made by a nine-judge constitution bench, headed by Chief Justice DY Chandrachud, which dismissed the Center's request to apply the court's earlier ruling from 25 July 2024 only for the future.

In the July 2024 ruling, the court affirmed the states' right to impose taxes on mineral rights and mineral-bearing land, overturning a 1989 judgment that had previously given the Center exclusive control over imposing royalties on these resources.

The Supreme Court had clarified in its July decision that the power to tax mineral rights lies with the states. The recent ruling allows states to collect royalty dues dating back to 1 April 2005.

The center had argued that the court's ruling should only be effective from that point onward, but the bench disagreed. It ruled that states could recover past dues, allowing payments to be spread out over the next 12 years.

However, the court instructed that states should not impose penalties on these payments to avoid adding financial pressure on mining companies.

#2 Continuously Declining Prices

NMDC has continued to slash price in August 2024.

India's largest iron ore producer has decreased the price of iron ore lump by Rs 600, bringing it down to Rs 5,350 per tonne from Rs 5,950 per tonne.

The price of iron ore fines is also reduced by Rs 500, now set at Rs 4,610 per tonne, down from Rs 5,110 per tonne, according to a BSE filing by the company.

The price reduction is effective from 7 August 2024.

This reduction comes after an earlier price cut in early July, when NMDC lowered lump ore prices from Rs 6,450 per tonne in June to Rs 5,950 per tonne. During the same period, fines prices were reduced from Rs 5,610 per tonne to Rs 5,110 per tonne.

The company's share price is falling due to declining iron ore prices, which are negatively affecting its revenue.

What Next?

The company has outlined a strategic plan focused on significant growth and investment. It's plan is to become a 100 million (m) tonne company within the next 5 to 6 years, with approximately Rs 500 bn in investments already in the pipeline.

These investments cover various stages, from pending sanctions to projects currently in the tendering phase.

For FY25, it has set an ambitious target of producing 50 m tonne, despite some setbacks earlier in the year. The following year, the goal is to reach 54 m tonne, indicating a clear path for growth.

The capital expenditure for FY25 is expected to be around Rs 20 bn. This relatively modest expenditure is attributed to most large projects being in the initial stages, where costs are primarily related to design, drawing, and equipment.

Additionally, the company is addressing employee wage negotiations, with provisions already made in the current accounts to cover the expected increases. This prudent financial planning ensures stability in employee costs moving forward.

In terms of future production, the company is optimistic about the output from its mines, particularly the Kumaraswamy and Bacheli mines, which are expected to contribute significantly to the overall production target.

The planned ramp-up in production, along with strategic investments in new crushing plants, slurry pipelines, and distribution networks, positions the company for sustained growth and increased profitability in the years ahead.

How NMDC Share Price has Performed Recently

In the past five days, NMDC share price tumbled 3.2%. In the last month, it is down 12%.

In 2024, so far its share price is up 2.7% and it surged 85.2% in the last year.

The stock touched its 52-week high of Rs 286.4 on 21 May 2024 and a 52-week low of Rs 105.7 on 3 July 2023.

About NMDC

NMDC is the largest iron ore manufacturer in India.

It's engaged in the business of exploration and production of iron ore, diamonds, and sponge iron. The company also forayed into renewable energy and generates and sells wind power.

NMDC has seven iron ores mines in the country with a total production capacity of 36 million tonnes, accounting for 18% of the domestic production. It mostly supplies iron ore lumps and fines to steel manufacturing units and metallurgy industries.

The company has the lowest cost of producing iron ore in the country and enjoys cost leadership over its peers. This led the company to move up the value chain and establish its steel plant with a manufacturing capacity of 3 million tonnes.

For more details about the company, you can have a look at NMDC's factsheet and NMDC's quarterly results on our website.

You can also compare NMDC with its peers.

NMDC vs GMDC

NMDC vs MOIL

Happy Investing!

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