Mumbai The government intends to start its 2012-13 divestment plan by offloading a further 10% stake in the state-owned iron ore producer, National Mineral Development Corporation (NMDC), through the offer for sale (OFS) mechanism for nearly R7,000 crore. Even though the government had to defer its plans of diluting stake in other public sector entities, such as Steel Authority of India (SAIL) in 2011 and Rashtriya Ispat Nigam (RINL) in the recent past, due to valuation concerns, the NMDC follow-on public offer may not face such hurdles, say market experts. The likelihood and the extent of a discount at which the FPO may get offered would be a balancing act between the global demand cycle and NMDC’s rising status as the only pure domestic iron ore player, say experts. “To intensify demand for the NMDC FPO, some discount would be preferred as, globally, the metal sector is not doing well and iron ore as a product is not witnessing an up-cycle internationally,” says an analyst tracking the company. However, he points out that offloading of the NMDC stake may be easier than pushing for stake sale in steel producers, given that the company is turning into the sole domestic iron ore play. Unlike, Sesa Goa, its closet competitor, NMDC does not face regulatory hurdles and is relatively insulated from global volatility. While NMDC, Sesa Goa and SAIL are all in the business of iron ore production, NMDC and Sesa Goa are considered as the producers as SAIL has a captive use of its production for steel manufacturing. What differentiates NMDC from Sesa Goa is that it produces high quality iron ore, most of which it sells domestically. On the other hand, Sesa Goa's business is export-oriented as it produces lower quality iron ore that is primarily used by China. On valuation basis, currently, NMDC appears expensive than Sesa, given that the latter is offering earnings per share (EPS) that is 1.5 to 2 times that of NMDC even as both the stocks are trading at similar price range of R177.45 and R171.95, respectively. “Such comparisons may not be effective at this point of time, given that Sesa's iorn ore businesses are not expected to contribute more than a fifth to its consolidated earnings even if the regulatory environment turns supportive for its iron ore business,” said Saurabh Agarwal, a metals and mining analyst with Kotak Securities. This is because Sesa is on its way to get merged into Sterlite and the resulting entity, Sesa Sterlite, is also going to reflect a 20% stake of Cairn India following the business restructuring plan of the parent Vedanta Group. Moreover, currently, Sesa Goa's mining operations, both in Goa and Karnataka, stand suspended following various regulatory restrictions imposed by the ministry of environment and forests), Goa State Pollution Control Board and the Supreme Court. The government currently holds 90 % stake in NMDC after it offloaded its 8.38 % holding of then 98.38 % stake in the company in March 2010.