NMDC sees worst fall in weeks after Kotak Institutional Equities cuts earnings estimates

Shares of NMDC, India's largest iron ore miner, declined the most in over seven weeks after Kotak Institutional Equities cut its earnings estimates for the company due to pressure on domestic prices and decline in sales volume.

The stock was trading 5.50 percent lower at Rs 103 per share on the BSE at the time of writing.

Kotak Institutional Equities has revised its rating on NMDC to 'REDUCE' from 'SELL' saying that the "recent stock underperformance captures the sharp margin contraction from 2QFY23E".

The company has cut the prices of iron ore lump and fine by Rs 500 a tonne each. With multiple cuts since April owing to high inventory, NMDC has reduced the lump price by 36 percent and the fine price by 46 percent.

In June, the company announced a sharp cut of Rs 1,100 per tonne in the price of lump ore and Rs 1,000 for fines. The lump ore price now stands at Rs 3,900 a tonne and fine price stands at Rs 2,810 a tonne.

Iron ore is one of the key raw materials used in the manufacturing of steel, and any movement in the prices of the mineral has a direct impact on the rates of steel, which has been a matter of concern for the user industries for past couple of months.

While lump is high-grade iron ore having Fe (iron) content above 65 percent, fine is inferior grade ore which needs beneficiation.

NMDC also has plans to invest in the renewable energy sector, according to its chairman and managing director Sumit Deb. Deb on July 10 said that the company is exploring locations in Telangana to set up solar capacities.

NMDC will be excluded from Nifty CPSE (Central Public Sector Enterprise) on August 5 as part of the quarterly recapping. The company has a weight of 4.9 percent in the index.

"Approximate outflow on account of this rebalancing event will be ~$85-95 million odd," said IIFL Alternative Investment Funds.