The sale, part of the government's divestment programme to raise $5.5 billion by next March, will be the biggest by a state-run company since a $2.5 billion selldown in Oil and Natural Gas Corp in March.
The government may on Tuesday announce a floor price for the NMDC issue in a range of 145 rupees to 150 rupees a share, said two sources with direct knowledge who asked not to be named as details are not yet public.
The sale is part of the government's divestment programme to raise $5.5 billion by next March.
The government, which owns 90 per cent of NMDC, will sell a 10 per cent stake, NMDC said in a notice to the stock exchanges. At the top end, the sale will garner about $1.1 billion.
NMDC shares closed 2.3 per cent lower at 154.75 rupees, ahead of the decision. The stake sale would be carried out via an auction to institutional investors, and will open on Wednesday morning and close later in the day.
New Delhi has so far raised $148 million from the sale of stakes in state companies in a process hit by volatile markets and wrangling among government officials.
The government is likely to step up its divestment programme in the months ahead amid concerns about its ballooning fiscal deficit, which is seen at 5.6 per cent of gross domestic product in this fiscal year, above an official target of 5.3 per cent.
The scale of the deficit will make it tougher for New Delhi to avoid a credit rating downgrade.
Other state companies in which the government expects to reduce its stake in the coming months include explorer Oil India, power producer NTPC Ltd and National Aluminium Co.
Citigroup, Goldman Sachs, Bank of America Merrill Lynch and Indian investment banks ICICI Securities and Enam Securities are the bankers for the NMDC share offering.