Alpha | NMDC Ltd. – Fairness Analysis DeskInsights

NMDC Ltd. – India’s largest iron ore producer

Established in 1958, NMDC Restricted, a Navratna Public Sector Enterprise (PSE) working beneath the aegis of Ministry of Metal, is the nation’s largest and world’s sixth largest iron ore producer. Headquartered in Hyderabad, NMDC operates 4 iron ore mechanized mines viz., Bailadila Iron Ore Mines – Kirandul Complicated (Dep-14, 14 NMZ, 11B & 11C), Bailadila Iron Ore Mine – Bacheli Complicated (Dep-5,10 & 11A) within the Chhattisgarh State, Donimalai Iron Ore Mine and Kumaraswamy Iron Ore Mine within the Karnataka State. The corporate is contributing to round 16% of home iron ore manufacturing (excluding captive iron ore manufacturing). NMDC can also be the one organised producer of diamond in India from its Majhgawan mine at Panna, Madhya Pradesh. In a pursuit to broaden its enterprise globally, the corporate has acquired 90.05% (as of 31 March 2023) stake in Legacy Iron Ore Ltd, Australia.

Merchandise and Providers

The corporate has in depth expertise in exploring and extracting varied minerals, together with iron ore, copper, rock phosphate, limestone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite, seaside sands and so forth.

Subsidiaries: As of FY23, the corporate has 5 subsidiaries, 4 affiliate and 4 three way partnership firms.

Key Rationale

  • Progress plans – To reinforce the manufacturing and to enhance the standard of product combine from Bailadila Sector, the schemes like SP (Screening plant)-III Kirandul, New Crushing Plant of Dep.14 & 11/C and Downhill conveyor, extra screening traces in Bacheli, Fast Wagon Loading System (RWLS) and so forth. are envisaged. The corporate has utilized for EC extension of 5 MTPA at Deposits 14 and 11C. For few different deposits, NMDC has utilized for 10% EC extensions which administration expects to obtain and not using a public listening to and with  roughly 6 month timeframe. To boost the operations, firm is investing in lots of initiatives equivalent to slurry pipeline, related beneficiation plant (anticipated to scale back transit value and dependence on railways) and so forth.
  • Diversified operations – NMDC is diversifying its operations past exploration and mining. The corporate has invested within the development of a 3 MTPA built-in metal plant in Chhattisgarh (now demerged as a separate authorized entity as NMDC Metal Restricted) and a 1.2 MTPA pellet plant in Karnataka. It has additionally ventured into the mining of coal by means of the allocation of two coal blocks in Jharkhand on nomination foundation by the Authorities of India.
  • Q3FY24 – In the course of the quarter, the corporate earned income of Rs.5,410 crore, a rise of 45% in comparison with the Rs.3,720 crore of Q3FY23. EBITDA improved by 76% from Rs.1,141 crore of Q3FY23 to Rs.2,007 crore of the present quarter. The corporate reported internet revenue of Rs.1,482 crore, a progress of 62% in comparison with the corresponding interval within the earlier 12 months. NMDC may obtain larger than anticipated improve in common realisation as the corporate had taken worth hikes through the quarter. The corporate was in a position to obtain a big quantity pushed progress in turnover throughout 9MFY24.
  • Monetary efficiency – The corporate has generated income and PAT CAGR of 15% and 9% over the interval of three years (FY20-23). Common 3-year ROE & ROCE is round 28% and 37% for FY20-23 interval. The corporate has strong capital construction with a debt-to-equity ratio of 0.09.


Mining business has the potential to considerably impression GDP progress, overseas change earnings, and provides end-use industries like constructing, infrastructure, automotive, and electrical energy a aggressive edge by acquiring important uncooked supplies at affordable charges. Demand for iron and metal is about to develop as the federal government’s augmented deal with infrastructural growth continues with elevated development of roads, railways, airports, and so forth. India is the second-largest producer of crude metal on the planet and in addition the fourth-largest iron ore producer on the planet. The nation can also be the biggest sponge iron (DRI) and fourth largest iron ore producer on the planet. All these components are anticipated to drive the metal demand via-a-vis iron ore demand in future.

Progress Drivers

  • The federal government plans to monetize belongings price Rs.28,727 crore (US$ 3.68 billion) within the mining sector over 2022-25.
  • 100% FDI by means of automated route within the mining sector.
  • Indian authorities’s initiatives and schemes equivalent to Gati Shakti Grasp Plan, Make in India, Pradhan Mantri Awas Yojna – Housing for all, City Infrastructure growth scheme for small and medium cities is anticipated to foster the expansion of Metals and Mining sector in India within the subsequent few years.

Opponents: Vedanta Ltd, Lloyds Metals & Power Ltd and so forth.

Peer Evaluation

Compared to the above rivals, NMDC is probably the most undervalued inventory with wholesome returns on the capital employed and secure progress in gross sales. 


NMDC has a complete strategic administration plan to boost its iron ore manufacturing capability to 67 MTPA by FY26 and additional to 100 MTPA by FY30 to fulfill the rising necessities of iron ore on the Indian metal sector. The technique focuses on progress is essentially by means of brownfield enlargement of current mines and enhancing the evacuation infrastructure. The corporate had given a quantity steerage of 47 MT (million tonnes) for FY24, optimistic on reaching this goal topic to Kumaraswamy enhancement approval. It has additionally given a quantity steerage of 50-51 MT for FY25 and there could possibly be a capability constraint for 2 years for any important addition. The capex steerage of Rs.1,750-Rs.1,800 crore for FY24 and the corporate is progressing effectively to realize it having spent Rs.1,500 crore until January FY24. Capex steerage for FY25 is at Rs.2,000-2,100 crore by means of inner accruals. The corporate has a money stability of Rs.15,500 crore on the finish of Q3FY24. Earnings outlook stays sturdy with a significantly secure worth undertaken through the quarter.


We anticipate NMDC Ltd. to profit from the sturdy demand for metal within the home market due to the sturdy push from authorities for infrastructural growth.  We advocate a BUY score within the inventory with the goal worth (TP) of Rs. 263 12x FY25E EPS.


  • ESG threat – The corporate is topic to the inherent ESG threat the mining sector is topic to. The administration have to be cautious of any ESG threat which will have an effect on their means to boost capital, acquire permits, work with communities & regulators.
  • Allowing threat – It takes longer intervals to safe permits wanted to begin operations in areas with stringent environmental rules, impacting the amount and manufacturing estimates.

Recap of our earlier suggestions (As on 05 Apr 2024)

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