MMTC stake sale: Centre finds no takers

In new trouble for the government on the disinvestment front, the sale of MMTC shares is facing difficulty as no reputed merchant banker is willing to handle the issue.

This is the second issue after Rashtriya Ispat Nigam Ltd that has run into problems, making the chances of the government reaching its Rs 30,000-crore disinvestment target seem virtually nil now. In both cases, the problem is of valuation.

Merchant bankers have advised the government that the price of MMTC shares is too high given the enterprise value of the company and the thin trading volumes. India's premier trading and mining company's shares are selling at Rs 725 (par value Rs 1) at the NSE but the total quantity traded was only 63,753 on Friday, making price discovery difficult. Hindustan Copper's shares were traded at Rs 259 with a volume of 1,66,650 while Hindutan Zinc was trading at Rs 134 (volume 9,55,257).

If the issue is priced low there could be charges of selling cheap, which the government is keen to avoid. But at the current price, the issue is unlikely to generate any interest in the market, said one banker.

"MMTC is a very strong player in the mining industry. But its share price in the market is very ambiguously priced due to low float," said the banker who did not wish to be named. The company has a public float of only 0.67 per cent.

Confirming the development, a senior official said: "We want more people to apply before we select merchant bankers for the FPO."

The deadline for the merchant bankers to submit expressions of interest has been postponed twice since the disinvestment department invited bids from merchant bankers for managing the 9.33 per cent stake sale in MMTC last month.

The deadline of September 28 for submitting bids was put off to October 12 and then again to October 23.

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