Kolkata: State-owned miner Coal India Ltd (CIL), which will list on the stock exchanges soon, has told the Union government that it does not want to issue new shares under its forthcoming initial public offering (IPO) of shares, a significant departure from the approach of most state-owned firms that have sold shares along with the Union government at the time of an initial share sale.
CIL, which along with its subsidiaries mines around 420 million tonnes of coal a year, had a consolidated cash balance of Rs29,665 crore at the end of the fiscal 2009, and doesn’t want to expand its Rs6,316 crore equity base, according to the company’s chairman Partha S. Bhattacharyya.
The company was recognized as a “Navratna” (a status that gives state-owned firms a certain degree of autonomy) in October last year, and under statutes of the Union government, it has to get listed within three years.
Union coal minister Sriprakash Jaiswal said in June that the government was looking to sell 10% of CIL’s shares through the initial share sale. The government has been selling shares in companies owned by it since 1991-92.
“We have told the government that it could sell its shares to the public, but Coal India doesn’t need to raise capital through the IPO,” said Bhattacharyya.
Cash at hand: CIL chairman Partha Bhattacharyya says the firm has told the government it doesn’t need to raise capital through the IPO. Pankaj Nangia / Bloomberg
Since the company currently has enough cash in its coffers to meet its capital expenditure plans, it does not want to depress earning per share (EPS) by expanding its equity base, he explained.
Though CIL wouldn’t raise money, it would benefit immensely from the IPO if the Union government agrees to its proposal to reserve at least 10% of the shares to be sold for its employees and people from whom the miner has acquired land for expanding its mines. The state-owned miner wants its employees and people who have had to give up land for its mines to become its shareholders, Bhattacharyya had said earlier.
“Coal India should get a very good response (from investors) but I think the government is going to take some time to launch the issue,” said Utsav Parekh, non-executive chairman of Smifs Capital Markets Ltd, a Kolkata-based merchant banker.
In fiscal 2009, CIL’s profit after tax fell 60% from the previous year to Rs2,078.69 crore, despite a 19% increase in net sales to Rs38,789 crore.
One of the key reasons for the decline in net profit was substantial loss from underground mining, which in the long run would not remain unprofitable, according to a key CIL official who did not want to be identified.
CIL is set to form joint ventures with international miners to revive some 18 abandoned underground mines, and with the technology that its partners bring in, the company hopes to make underground mining profitable, he added.
Asked if CIL was looking to integrate its wholly owned subsidiaries ahead of the IPO, Bhattacharyya said the “decentralized structure” enables the company to operate efficiently. “It works very well for CIL, and so (we) wouldn’t want to disturb it,” he added.