New Delhi: The Indian government might allow Coal Ventures International Ltd (CVIL), a special purpose vehicle, or SPV, formed by metal and mining public sector companies to acquire coal mines abroad, access to sovereign funds while speeding up the process of shortlisting three global merchant banks to advise them on acquisitions.
“At least 15 global merchant banks had reciprocated in response to our expression of interest for advising the SPV on scouting for coal properties abroad and help in doing due diligence. We will finalize at least three such banks within two months,” said a senior government official, who declined to be named.
“Besides, we are also considering to allow CVIL access to sovereign funds to enable them to carry out acquisitions and mergers,” he said. A sovereign fund is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments.
The CVIL was formed by state-run firms that include India’s largest coal producer Coal India Ltd, steel makers Steel Authority of India Ltd and Rashtriya Ispat Nigam Ltd, power generator NTPC Ltd, and mineral exploration company National Mineral Development Corp. Ltd.
The SPV would have an initial capital of Rs3,500 crore, which would be taken up to Rs10,000 crore, to secure coal properties abroad, including Australia, Canada and Africa, according to the official.
“In course of our interactions with bankers recently, we found that the SPV partners will have to pool in more resources, as the money outlayed for acquiring coal properties abroad may be grossly insufficient. Acquisition of majority stake in any overseas mines will entail an expenditure of at least $5-6 billion,” the official said.
India’s central cabinet of ministers gave its go-ahead to the SPV in November 2007.