COAL IN­DIA STAKE SALE 2.0 TO NET RS 23,400 CR

Resource Digest - - COAL -

Faced with a daunt­ing dis­in­vest­ment tar­get of Rs 69,500 crore for the cur­rent fis­cal, the gov­ern­ment on re­cently un­veiled a plan to sell a fur­ther 10% stake in Coal In­dia, a move that could fetch it around Rs 23,400 crore at cur­rent mar­ket prices. If the sale goes through, it would be the sec­ond stake sale in the mono­lithic coal miner in as many fis­cal years. The gov­ern­ment sold 10% in CIL to raise Rs 22,557 crore in Jan­uary 2015, which was al­most 93% of the dis­in­vest­ment re­ceipt in FY15. It was also the largest ever dis­in­vest­ment re­ceipt in a sin­gle PSU is­sue.

In a no­ti­fi­ca­tion is­sued re­cently invit­ing ap­pli­ca­tions from bankers to man­age the mega-of­fer for sale, the depart­ment of dis­in­vest­ment (DOD) said the gov­ern­ment would dis­in­vest 10% stake (about 63.16 crore shares) out of its share­hold­ing of 78.65% in CIL. CIL is the fourth-largest listed com­pany in terms of mar­ket cap­i­tal­i­sa­tion, which was R2.35 lakh crore as on Au­gust 12.

The gov­ern­ment also plans to al­lot shares to employees of CIL at a dis­count of up to 5% of the is­sue price sub­ject to cer­tain con­di­tions.

Thanks to the fuel sup­ply obli­ga­tions be­ing en­forced on it and coal-bear­ing states let­ting the PSU ac­quire land ex­pe­di­tiously for new projects, CIL’S pro­duc­tion has seen a ro­bust in­crease since last fis­cal. The PSU’S coal pro­duc­tion recorded a 12% jump in the April-june quar­ter over the same pe­riod last fis­cal. Its pro­duc­tion had grown by more than 7% to 494 mil­lion tonnes (mt) for FY15, the high­est growth in four decades.

The gov­ern­ment has set an am­bi­tious dis­in­vest­ment tar­get of Rs 69,500 crore for FY16. Of that, Rs 41,000 crore would be raised through divestment of 3-15% stake in PSUS and an­other Rs 28,500 crore would be raised through strate­gic sales in­clud­ing divestment of resid­ual gov­ern­ment stake in some pri­vate com­pa­nies and, pos­si­bly, pri­vati­sa­tion of some PSUS.

How­ever, the gov­ern­ment has so far man­aged to sell 5% each in Ru­ral Elec­tri­fi­ca­tion Cor­po­ra­tion and Power Fi­nance Cor­po­ra­tion to net about Rs 3,200 crore. The DOD has at­trib­uted the slow pace of dis­in­vest­ment this year to volatil­ity in the stock mar­ket.

The pro­posed stake sale in CIL in­di­cate that the gov­ern­ment has launched a fresh drive to meet the dis­in­vest­ment tar­get, which is cru­cial to con­tain fis­cal deficit.

The DOD is also in the process of ap­point­ing merchant bankers for about 12 com­pa­nies. They in­clude In­dian Oil (10%), NTPC (5%), Nalco (10%) and Oil In­dia (10%).As per a strat­egy adopted by the DOD, it has pre­pared a rolling pipe­line of PSU stocks, which would be off-loaded in the mar­ket at small win­dows of op­por­tu­ni­ties.

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