Mining Bill, profit sharing to hit ops: MOIL, Hind Copper

Mining PSUs Manganese Ore India (MOIL) and Hindustan Copper (HCL), which are gearing up for share sale programmes, have expressed fear that the proposed mining Bill and its profit sharing clause would have an adverse impact on their operations and financials.

"The Mines and Minerals (Development and Regulation) Bill, 2010, has been proposed to replace the Mines and Mineral Development and Regulation Act, 1957, which may adversely affect our results of operations and financial position," MOIL said in the draft prospectus filed with market regulator Sebi for its public offer.

Echoing sentiments, HCL said, "If approved in its current form, this Bill may have a material impact on our business and financial conditions and future acquisitions of mines."

When contacted, senior officials from the Ministries of Steel and Mines said that such statements are part of "risk factors" of the draft prospectus. MOIL comes under the Steel Ministry while Hindustan Copper is under the administrative control of the Ministry of Mines.

"What do you expect us to write under the risk factor section of the draft prospectus," an investment banker, involved in the public offers of one of the companies, added.

The two PSUs joined state-owned SAIL and private sector giant Tata Steel in opposing the Bill mainly on its clause which seeks the companies to share profit.

The government is in process of formulating new mining law, which among other things, mandates firms to share 26 per cent of profit from mining with the displaced people. Industry has already locked horn with the government on the Bill.

According to Mines Minister B K Handique, the Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee recently reached at a consensus on the Mines and Minerals (Development and Regulation) Bill, 2010. The GoM is expected to meet soon and may clear the Bill.

MOIL and Hindustan Copper had recently approached Sebi for their share sale, which will see government divesting some of its stake in the firms, as part of its efforts to raise about Rs 40,000 crore from the sell off in the current fiscal.

MOIL's share sale will see 20 per cent equity dilution, 10 each from the Centre and two states--Maharashtra and Madhya Pradesh. At present, the Union government holds 81.57 per cent in the company, Maharashtra 9.62 per cent and Madhya Pradesh 8.81 per cent stake.

HCL's 20 per cent FPO will see the Centre selling 10 per cent of its stake in the company and the PSU raising fresh equity in the same proportion. The share sale is expected to raise as much as Rs 4,000 crore.