"Nagarnar Steel Plant: NMDC Ventures into Steel Stocking and Marketing Operations"

NMDC, India's largest iron-ore miner, has put forth a proposal to play a pivotal role as a stockist-cum-distributor for steel produced by its recently formed subsidiary, NMDC Steel Ltd (NSL). The financial commitment for NMDC in this venture is anticipated to range between ₹240–300 crore.

This initiative arises amidst uncertainties surrounding the disinvestment of NMDC Steel, coupled with its financial limitations to undertake significant capital expenditure or establish downstream facilities like distribution channels and stockyards. Notably, NMDC Steel has encountered challenges due to its substantial debt exposure and a lack of funds for infrastructural development.

NSL refrained from developing downstream infrastructure owing to financial constraints and ambiguity over its future ownership, considering its inclusion in the government's disinvestment plans.

NMDC has communicated to the Steel Ministry, acknowledging this as a related party transaction necessitating clearance from the Audit Committee post Ministry's approval.

The proposed model, initially to be implemented in Hyderabad and Visakhapatnam targeting the South Indian markets, entails NMDC purchasing hot rolled coils at a predetermined price, engaging in MoUs with buyers for sales, and appointing handling contractors. The process mandates various approvals and licenses.

The proposal emphasizes NSL's inability to establish its own stockyards and distribution systems due to financial limitations and impending disinvestment. Consequently, NMDC aims to bridge this gap by serving as a 'stockist cum distributor' for NSL's 'made to stock' production, entailing cash-and-carry sales without credit facilities, and manufacturing as per demand.

Efforts to engage SAIL, RINL, and a private player as stockist-cum-marketing agents have been unsuccessful due to unfavorable terms, including high commission rates.

HBL