Why MMTC Share Price is Falling

Today's a big day for two public sector undertaking (PSU) stocks - MMTC and State Trading Corp (STC).

According to media reports, the union commerce minister Piyush Goyal is holding a high-level meeting today to explore the closure of these state-run entities.

According to data available on the BSE, the government holds around 90% stake each in both these companies.

Soon after this news broke out last week, share price of MMTC surged over 40% in five sessions.

But the rally was short lived as the stock has seen a free fall.

Last Friday, the stock plunged 10%. From a high of Rs 87 touched last week on Tuesday, MMTC shares cracked to Rs 60.3 today, registering a fall of 31% in five sessions.

The current drop in the share price of MMTC is being termed as the "everything sell-off".

If you're a shareholder in MMTC, you need to see this...

Delisting Reports Trigger Massive Volatility

Ever since the news was out, the stock has been on a roller-coaster ride. First, there was a steep rally followed by panic sell-off in the counter.

According to a report, the government may wind down the PSU due to a lack of investor interest in its offer-for-sale (OFS).

The report stated that the government could seek the company's closure to the alternative mechanism (AM) due to a lack of investor participation.

Alternative mechanisms allow for speedy decisions on strategic divestment, minority stake sale and closures of PSU units. Here, the decision is upon select ministers to see what could be the next best move. The government currently holds around 90% stake in MMTC.

According to experts, once the necessary internal approvals and due diligence are completed, these companies are likely to be folded up. So, you could see why there's a sharp fall in stock price in the past couple of days.

The volatility is expected to continue for the next few sessions.

Why is MMTC Shutting Down?

Coming to why the company is being shut down, reports suggest that the core purpose of these public sector units has become obsolete.

In case of State Trading Corp, the company had zero revenue in the past two years due to suspended business activities. For MMTC, revenues were down 70% in FY23.

The company is engaged in the business of exporting and importing precious metals, non-ferrous metals, fertilisers, agro-products, coal, and hydrocarbons.

The centre had earlier discussed the need for these companies in the Department of Commerce and found them unnecessary.

MMTC also had its stockbroker licence cancelled by the markets regulator in August 2023 for involvement in illegal paired contracts related to National Spot Exchange Ltd (NSEL). In September 2022, MMTC and STC lost their status as canalising agencies.

As per the New Enterprise Policy, all PSUs will either be privatised or closed if privatisation is not feasible within the non-strategic sector.

While there are other options like demerger and asset sale for the government to consider, experts believe these processes are complex and it makes sense for the government to shutdown these entities.

However, the government hasn't ruled these options out. We'll get to know more once today's meeting details are out.

How MMTC Share Price has Performed Recently

In the past five days, the stock price is down over 30%.

MMTC today fell 5% to touch a low of Rs 60.33.

It has a 52-week high of Rs 89 touched on 17 October 2023 and a 52-week low of Rs 26.4 touched on 28 April 2023.

In the past one year, shares of MMTC have rallied 71%.

About MMTC

MMTC (known fully as Metals and Minerals Trading Corporation of India) is one of the two highest earners of foreign exchange for India and India's largest public sector trading body. MMTC is an India-based trading company.

The company's segments include minerals, precious metals, metals, agro products, coal & hydrocarbon, fertiliser, and others.

The company is engaged in trading agricultural products, such as wheat, rice cleared of the husk, corn, soybean food, edible oil and pulses.

For more details, see the MMTC company fact sheet and quarterly results.

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