Neyveli opposes further public float

Says share price low, worker unions restive and there’s enough money with it for investment needs.

State-owned Neyveli Lignite Corporation (NLC) has opposed the Union government’s move to offload 10 per cent stake in the company, citing unfavorable market conditions and a possible backlash from workers’ unions.

“Every disinvestment move is primarily undertaken to mobilise targeted resources in the Budget and considering the present adverse market conditions, the proposed disinvestment may not fetch the expected quantum," NLC said in a note to the coal ministry.
 

DISINVESTMENT MOVE

* The finance ministry had proposed a 10 per cent disinvestment in the company through a follow-on public offer

* At present, the government holds 93.5% stake in Neyveli and the rest is with the institutions, mutual funds and employees

* Neyveli Lignite has authorised capital of Rs 2,000 crore and equity capital of Rs 1,677 crore

The ministry had sent on a finance ministry proposal for a 10 per cent stake sale to the company’s board. The government holds 93.5 per cent of equity in the company, which is listed on the Bombay Stock Exchange (BSE). It had divested 6.44 per cent equity in the past.

NLC has an authorised capital of Rs 2,000 crore and an equity capital of Rs 1,677 crore. The company was accorded Navratna status this April. Once this is done, the rule is that at least 10 per cent of the government’s stake in a company has to be offloaded within three years. The company was listed on the BSE a decade earlier.

However, the company has expressed reservations, arguing its shares have been taking a beating at the bourses. "In 2010-11, the share’s highest price quoted was Rs 180.65 in October 2010 and the lowest price of Rs 91.60 was quoted in February 2011. Presently, it is quoting at around Rs 75,” it said.

The government’s plan to dilute equity in NLC in 2006 had met with stiff opposition from its coalition partner, the DMK. Other Tamil Nadu parties such as the AIADMK and PMK are opposed to any further selloff, too, in the state-based company. Trade unions had gone on strike opposing the plan.

The NLC board has also said it is in no need of fresh equity, as it had surplus reserves. “The reserves are being used in a planned manner for new and expansion projects. So, there was no need to raise any fresh equity from the market till the end of the 12th Plan,” the note said.

NLC has four open-cast lignite mines, with a capacity of 30 million tonnes per annum. it has planned to add another 13 mt in a few years. The company also produces 2,740 Mw of power annually from four power plants. It is setting up power plants of another 7,000 Mw capacity across the country.

The share price on the BSE closed on Tuesday at Rs 73.7, down 2.5 per cent as compared to the previous close.