NMDC's 100 MT iron ore plan faces near-term price and capex headwinds

Investment View and Valuation

In its August 17, 2026 company update, ICICI Direct Research maintains a HOLD rating on NMDC Ltd. The broker sees NMDC as structurally well placed to benefit from higher domestic steel consumption and the resulting iron ore demand. However, near-term upside is considered constrained by range-bound iron ore prices and elevated capital expenditure.

ICICI Direct values NMDC at Rs 90 per share, based on 6x FY28E EV/EBITDA, compared with a CMP of Rs 85.

Q1 FY27 Operating Performance

NMDC reported steady operating performance in Q1 FY27. Total operating income increased 1 per cent year-on-year to Rs 6,795 crore, while iron ore sales volume rose 2 per cent year-on-year to 11.7 million tonnes. EBITDA declined marginally by 0.4 per cent year-on-year to Rs 2,468 crore, and EBITDA per tonne was Rs 2,104 compared with Rs 2,152 in Q1 FY26.

Long-Term Iron Ore Demand Opportunity

The broker’s long-term thesis is supported by India’s low per-capita steel consumption of about 103 kg, compared with a global average of about 215 kg. The report notes the government’s aim to increase Indian per-capita steel consumption to 160 kg by 2030-31 and crude steel capacity to 300 million tonnes. This could drive iron ore demand to about 430 million tonnes.

NMDC produced about 50 million tonnes of iron ore in FY26 and operates seven iron ore leases with reserves of about 1,700 million tonnes. These reserves have an average iron content grade of about 64 per cent, positioning NMDC to participate in the expected demand growth.

Production Expansion and Capital Expenditure

Management has guided for iron ore production of 60 million tonnes in FY27, supported by the ramp-up of newly commissioned mines. Production increased 2 per cent year-on-year to about 12 million tonnes in Q1 FY27. NMDC is targeting production of 100 million tonnes per annum by FY30.

To support this expansion, NMDC plans capital expenditure of about Rs 50,000 crore across its mining operations. The planned investments include capacity additions at Kirandul, Bacheli and Donimalai; crushing, screening and beneficiation facilities; a 15 million tonnes per annum slurry pipeline; and upgrades to evacuation infrastructure.

Diversification into Coal and Critical Minerals

NMDC is diversifying beyond iron ore into critical minerals, including gold, diamonds, lithium, nickel, cobalt and rare earth elements. The Tokisud North coal block has commenced operations and has peak capacity of about 2.3 million tonnes per annum.

The Rohne coking coal mine, with peak capacity of about 8 million tonnes per annum, is expected to be commissioned in Q3 FY27. ICICI Direct believes these initiatives can diversify revenue sources and improve long-term earnings resilience.

Earnings Estimates

ICICI Direct reduced its FY27E and FY28E sales-volume assumptions by 2.8 per cent and 4.6 per cent, respectively, to 53.5 million tonnes and 57.2 million tonnes. The resulting estimates are summarised below.

Key Risks and Regulatory Developments

• A delay in the ramp-up of iron ore mines could affect NMDC’s medium-term volume targets.
• EBITDA per tonne exceeding the broker’s estimates is identified as a key risk to the earnings view.

The report also notes that the MMDR Amendment Bill 2026 restricts states from imposing new taxes, reducing uncertainty around potential additional taxation on NMDC’s Karnataka mines.