Coal news and updates

Battling to contain the Centre’s fiscal deficit at the targeted 4.1 per cent of gross domestic  product, the government on Wednesday decided to go for the biggest share sale ever by offloading up to 10 per cent stake in Coal India, which will fetch it up to Rs 24,000 crore at current market prices.

 

The government will sell 315.8 million shares, or 5 per cent stake, through an offer for sale, with an option to sell the same number of shares as a greenshoe option, Coal India said in a regulatory filing.

 

The disinvestment will help the government meet half of the Rs 43,425-crore revenue target from stake sales in the public sector, if the entire 10 per cent goes through.

 

At Wednesday’s closing price of Rs 384.05 a share, a 10 per cent stake sale in the world’s largest coal producer will raise Rs 24,257 crore.

 

Jagannadham Thunuguntla, head of fundamental research at Karvy Stock Broking, said for all practical purposes it would be a 10 per cent stake sale only, though the second 5 per cent would technically be resorted to after assessing the response to the first 5 per cent.  

 

“The appetite for Coal India is huge,” he said.

 

The floor or minimum sale price for the offer will be announced on Thursday. The OFS will start from Friday. This is the first share sale where the government has considerably reduced the time gap between the announcement of disinvestment and the date of the offer, in order to thwart the hammering down of shares by stock market players.

 

The government currently holds 89.65 per cent stake in Coal India, which was listed through a record initial public offering (IPO) in October 2010, raising Rs 15,199 crore.

 

With only Rs 1,715 crore being raised this fiscal by way of disinvestment in SAIL, the government is looking at aggressively selling stakes in public sector firms to help meet its fiscal deficit target for the year ending March 31.

 

The other major stake sale lined up is in Oil and Natural Gas Corp (ONGC), but slumping oil prices have dampened the company's prospects.

 

However, oil minister Dharmendra Pradhan said earlier on Wednesday that the government would sell 5 per cent stake in ONGC this fiscal even though falling global oil prices pose a challenge.

 

The ONGC disinvestment was to give the government at least Rs 15,000 crore. To overcome the shortfall, it has lined up a host of companies including NMDC, Indian Oil Corporation (IOC), Bharat Heavy Electricals (BHEL), National Aluminium (Nalco) and Dredging Corporation (DCIL). Five per cent stake sales in PFC and REC are also on the cards.

 

For the Coal India stake sale, the government has doubled to 20 per cent the quota reserved for retail investors, who can buy shares worth up to Rs 2 lakh in the share sale. They would also be given a 5 per cent discount to the bid price entered by them.

 

A minimum of 25 per cent of the Coal India issue would be reserved for mutual funds and insurance companies.

 

Earlier this month, trade unions in Coal India had gone on strike protesting against the stake sale. After the government explained to them the reasons, the unions called off the strike. In a joint statement, the coal ministry and trade unions said the proposed disinvestment was on the lines of Sebi guidelines that regulate the government's stake in a public sector company.

 

 

Source: http://www.business-standard.com/