3.09% Dividend Yield: Navratna PSU Company NMDC To Consider Bonus Issue After 16 Years; Buy Or Not?

NMDC, the largest iron ore producer in India and a Navratna Public Sector Enterprise under the Ministry of Steel, announced on Tuesday, November 5, that its board of directors will consider issuing bonus shares for the first time in 16 years. The decision is expected on November 11.

The board meeting set for Monday, November 11, will not only deliberate on the proposed bonus share issue but will also review and approve NMDC's financial results for the quarter ending September 2024. In an official statement, the company revealed that the board will "consider, approve, and take on record the Unaudited Financial Results (Standalone and Consolidated) for the quarter ended September 30, 2024, and a proposal for issuing bonus shares, subject to requisite approvals."

This potential bonus issue marks the first since May 2008, when NMDC announced a 2:1 bonus share distribution. If approved, this issue would be significant for NMDC shareholders, who have not seen a bonus share allocation in over a decade.

NMDC's share price closed at Rs 234.70 on the BSE, up 3.6% for the day. On the National Stock Exchange (NSE), the stock closed at Rs 234.98 per share, reflecting gains of 3.8%. Over the past year, NMDC has delivered impressive returns, with its share price surging by more than 46%. However, in the last six months, NMDC stock has faced a 13% decline.

NMDC's strong performance in the first quarter of FY25 has provided a solid foundation for investor confidence. The company reported a 19% year-on-year increase in net profit for the quarter, reaching Rs 1,969 crore. Revenue from operations remained stable at Rs 5,414 crore. NMDC's earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to Rs 2,725 crore from Rs 2,276 crore year-over-year, marking a notable increase. The EBITDA margin also expanded to 51% in the June 2024 quarter from 42% a year earlier.

As India's largest iron ore producer, NMDC holds a position with a production capacity of 450.22 lakh tonnes (LT) as of FY24. This robust capacity strengthens its ability to meet both domestic and international demand, a key factor underpinning its consistent financial performance.

With NMDC's stock up by 47% over the last year, shareholders are optimistic about the upcoming board decision on the bonus issue, which could attract additional retail interest. If approved, the bonus issue would be a positive development for both long-term shareholders and new investors looking to tap into NMDC's growth.