Coal news and updates

Manages to raise $80 million after reducing the issue size from $150 million; investors concerned over Rs 977 cr coal levy likely on the companyCESC Ltd raised around $80 million through a Qualified Institutional Placement (QIP) issue on Wednesday, much less than expected, due to tepid response from overseas investors. This is despite offering a discount to the market price a day before.

 

The Kolkata-based power and retail player with investment in the BPO space on Wednesday raised the money from a clutch of investors including Capital World, Blackrock and Invesco, which had mostly bid at or below the floor price of Rs 677.84 a share as the issue was offered at 5% discount, sources said.

 

"Against offer of $80 million, we have received $95-97 million worth of bids. The actual price of placement would be decided within a week," a CESC official said.

 

The size of the issue itself was scaled down from $150 million approved by the board and shareholders.

 

All this pulled down the scrip from a high of Rs 678 during early hours of the trade to Rs 656 at close.

 

The timing of the issue of an otherwise fundamentally strong company probably paid a role.

 

The issue was thought about just when the Supreme Court delivered its landmark judgement of en masse deallocation of coal blocks including two owned by CESC's subsidiaries -- Integrated Coal Mining Ltd and Mahuagarhi Coal Company Pvt Ltd -- in September while the placement is happening in the backdrop of promulgation of the Coal Mines (Special Provisions) Ordinance.

 

CESC will not only lose two coal mines, one of which is operating, but will also have to pay Rs 97 crore as penalty following the Supreme Court order for all the coals mined from these mines till date, according to the disclosure made in the placement document.

 

"Supreme Court has directed the allottees of the cancelled coal mines to pay an additional levy of Rs. 295 per metric tonne on the coal extracted from the mines since the extraction date, by December 31. The company, and not ICML, has been mentioned as an allottee for the coal mine operated by ICML in the SC orders. Accordingly, the company may have to bear the additional levy. As of June, the total additional levy based on the coal extracted amounts is estimated at Rs 977 crore," the disclosure said.

 

CESC is yet to decide whether to treat the penalty as a liability or an expenses, in which case its profitability would be impacted. It is also not sure whether Rs 977 crore can be recovered from its electricity consumers spread across Kolkata and adjoining areas.

 

"The company and its auditors are yet to determine the accounting treatment of this levy, which is dependent on the outcome of any legal remedies pursued by the company and also on the ability of the Company to recover the additional levy from its consumers through its tariff," CESC said adding that it has filed a writ petition before the Supreme Court seeking relief from the orders.

 

Part of the proceeds from the QIP would be used to acquire coal mines, the document said.

 

 

Source: DNA