February 24, 2010 / 1:49 PM / in 8 years

UPDATE 1-India NMDC $3 bln share sale to open March 10-sources

* Sale to run Mar 10-12, follow normal book building route

* Retail investors to get 5 percent discount

* Issue price range to be set on March 8 after ministers meet

* NMDC shares end down 1.5 pct in weak Mumbai mkt (Adds details, background, share price)

By Pratish Narayanan and Prashant Mehra

MUMBAI, Feb 24 (Reuters) - A share sale in India’s state-run miner NMDC Ltd (NMDC.BO) to raise about $3 billion will open on March 10, and follow the standard book-building system for Indian offerings, three sources with direct knowledge of the deal said.

The NMDC sale, closing on March 12, will be the third major stake sale by India’s government this year, and the first that will not follow a controversial ‘French Auction’ book-building system that was seen as putting off investors.

Under the French Auction system, institutional investors are allotted shares based on the value of their bid above a base price. Bidders at a higher price will be given priority when shares are allocated. Retail investors bid at the floor price.

The NMDC issue will follow the typical book-building procedure for Indian share offerings, where a price band is set and investors bid within that range, sources told Reuters.

The price range would be announced on March 8 after a meeting of a panel of ministers, two of the sources, who did not wish to be named as they were not authorised to speak to the media, said.

Shares in NMDC ended down 1.5 percent at 430.65 rupees in a Mumbai market .BSESN that fell 0.2 percent.

Retail investors and NMDC employees are likely to get a discount of 5 percent to the issue price, sources said.

    Citigroup (C.N), Morgan Stanley (MS.N), UBS UBSN.VX, Kotak Mahindra Capital (KTKM.BO), Royal Bank of Scotland (RBS.L) and Edelweiss Capital (EDEL.BO) are arrangers to the NMDC issue.

    This year’s two major government stake sales -- in leading power producer NTPC (NTPC.BO) and power-project financing firm Rural Electrification Corp (REC) (RURL.BO) -- did not give a discount to retail investors.

    The REC sale, which closed on Tuesday, was covered more than three times, helping raise about $760 million and easing concerns that interest in government stake sales was waning. [ID:nSGE61M0I7]

    This was in contrast to an earlier $1.8 billion sale in NTPC that was covered on the final day after state-run Life Insurance Corp of India and State Bank of India (SBI.BO) stepped in to buy shares.

    The government will sell an 8.38 percent stake in NMDC, the country’s top iron ore miner, bringing its public float in the company to 10 percent. It owns more than 98 percent in the firm.

    The sale is part of the government’s plan to offload stakes in 60 state-run firms over the next few years as it tries to raise funds for welfare programmes without stretching an already wide fiscal gap.

    Analysts estimate these sales could fetch between $6.5 billion and $11 billion in the fiscal year starting April 1. (Editing by Surojit Gupta)

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