Why NMDC shares are down 67% on some stock trading apps

PSU stock: NMDC Ltd shares turned ex-bonus in the ratio of 2:1 today. Adjusted for the bonus issue, the NMDC stock was trading 0.60 per cent higher at Rs 71.84 on NSE. But the scrip was down 66.50 per cent over yesterday's closing price (unadjusted) of Rs 214.45. It is possible that trading apps of certain brokerages might be showing the unadjusted NMDC share price for yesterday and, thus, suggesting a 67 per cent-odd fall on the counter.

For every one NMDC share that existing investors hold, two new NMDC shares would be allotted. In bonus shares, unlike stock split, new shares are issued at the existing face value of equity shares of the company. The corporate action increases the number of outstanding shares, reduces free reserves and surplus of the company, increase liquidity but reduces per share ratios such as EPS and book value.

Since Friday, December 27, is the record date for the corporate action, NMDC will determine eligible shareholders for bonus issue today only. The bonus share would be credited to investors soon. NMDC had issued bonus shares in May 2008 in the 2:1 ratio. The PSU is a consistent dividend payer. Broker ICICI Securities has 'ADD' rating on the stock.

Sharekhan expects the iron ore demand to mirror the strong steel sector growth in the country. NMDC will grow its volumes at a 8 per cent CAGR over FY24-27, it projected.

"However, the weak steel sector demand is putting a pricing pressure on iron ore prices. NMDC has recently increased prices by 17-18 per cent in both lumps and fines, but the current price increase is unlikely to
sustain," the domestic brokerage said last month.

"NMDC will deliver good volume growth over the next few years in tandem with India’s steel sector demand. But we maintain our Hold rating on the stock given the uncertain outlook on the pricing front. The stock trades at a 5.3x /4.8x its FY26/27 EV/Ebitda," Sharekhan added.