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NMDC Dividend May Fall Short of Government’s Expectations

State-run NMDC Ltd., India’s biggest iron ore producer, may pay 31 billion rupees ($494 million) as total dividend for the year to March 31, falling short of the government’s expectations.

“There are constraints on us as we have committed investment for building a steel plant,” Finance Director Swaminathan Thiagarajan said in an interview from the southern city of Hyderabad, where the miner is based. “We do not intend to dip into our reserve to pay dividend.”

Prime Minister Manmohan Singh’s government plans to seek 25 billion rupees from NMDC via a special dividend or a share buyback, two Finance Ministry officials with direct knowledge of the matter said in January. The company has already paid 11.9 billion rupees as interim dividend this year.

State-owned companies are under pressure to pay special dividends to help the government cut the budget deficit and prevent a sovereign credit-rating downgrade to junk. Coal India Ltd., the world’s largest producer, will pay a record interim dividend of 183 billion rupees, it said earlier this month.

NMDC is investing 160 billion rupees to build a steel mill in the central state of Chhattisgarh with an annual capacity of 3 million metric tons.

The miner’s shares fell 1.9 percent to 142.30 rupees at the close in Mumbai. The stock has declined 8.1 percent in the past year, compared with a 2.2 percent gain in the benchmark S&P BSE Sensitive Index.

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