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