Three NMDC buyouts by June in M&A refresh

State-owned mining company NMDC has raised the bar for acquisition of overseas assets.

The company has zeroed in on new bigger assets while the targets being considered last year are out of radar now.

To accommodate bigger ticket-size buys, NMDC has increased its budget for overseas acquisitions for this fiscal to `1,200 crore from a meagre `100 crore last year and is targeting assets that are valued at $100 million and above.

“We are now doing due diligence at four or five places. We are doing due diligence in Brazil, Mozambique, Australia and other places. We have signed confidentiality agreements with four to five mineral assets. We are going through the reports and data on these assets. You can see more activity in June this year. Some of these assets will be finalised. The due diligence process takes about 90 days,” N K Nanda, NMDC’s chairman and managing director (incharge) and director (technical), told DNA Money.
“There are two coal assets and one iron ore asset. But there are many coal assets the reports of which are being evaluated. In June this year, two assets will be finalised —an iron ore asset in Brazil and a coal asset in Mozambique,” he said.

Also, NMDC would finalise a deal with Australia’s Minemaker to acquire a 50% stake in Wonarah phosphate deposits, for which it was already in negotiations, he said, adding, “this would make the total assets (to be acquired by June) to three,” he said.

The company was evaluating several assets last year, but not many resulted in success post due diligence. “The assets that were examined earlier are not being taken forward. When we did a lot of due diligence last year, we could not acquire those assets. So we have started due diligence on new mineral assets,” he said.

According to him, the increase in budget several times this year is due to advance planning in evaluating the assets.

“We are starting well in advance. Since we kicked off the process in April, we will have some activity happening at the end of every 90 days. So we will also need more money to conclude the process. Even if we can finalise two assets in six months, we will see an investment of about `800 crore,” Nanda said.
Despite the unsuccessful due diligence process, NMDC is not wary of spending on it.

“Each due diligence costs about half a million (dollars). If the process is unsuccessful, that’s what we lose. However, there are some deals where the costs are linked to the success of the process. In those cases, even that money would not be paid,” Nanda said.