CIL to again fund Centre via share buyback

Coal India would again be generating cash for the central government, its principal shareholder, via the capital buyback guidelines issued last year.

In October last year, the monolith had extinguished 1.72 per cent of its shares after a buyback, estimated to have generated cash of ~2,500 crore for the Centre. The total cash given to the shareholders was ~3,650 crore. Now, to again raise money for its shareholders via interim dividend, Coal India is banking on its subsidiaries. “The buyback process is happening as per the Dipam (department of investment and public asset management) guidelines,” a Coal India executive told this newspaper.

The guidelines make it mandatory for every public sector undertaking having a net worth of at least ~2,000 crore and a cash and bank balance of ~1,000 crore to buy back a maximum 25 per cent of its equity shares.

Thus, five of Coal India’s seven mining subsidiary companies have to compulsorily buy back their shares and release idle capital. Eastern Coalfields, which recently came out of the ambit of the Board for Industrial and Financial Reconstruction, and North Eastern Coalfields, whose net worth is ~238.5 crore, will be out of this. Beside, the guidelines recommend payment of reasonable dividend at regular intervals. Announcement of an interim dividend coming on March 15 is in line with this. The guidelines state that instead of paying dividends based on the net profit, stateowned companies have to consider net worth. A profitable public sector unit has to pay either 30 per cent of the net profit or five per cent of its net worth as dividend, whichever is higher.