After tepid stake sale, Centre to receive Rs 32.87 bn more from Coal India

After the centre raised around Rs 84 billion from three rounds of stake sale in Coal India, it will again be receiving another Rs 32.87 billion from this Maharatna enterprise as interim dividend.

The company’s board, on Thursday, approved a payout of Rs 7.25 per share of the face value of Rs 10 each as recommended by its audit committee. The government, currently holds 72.92 per cent.

The total outgo from Coal India’s coffers as expense for this interim dividend is to the tune of Rs 45 billion and the company will start the payment  from January 5, 2019 onwards.

While Coal India, in the past had paid hefty dividends, of which the government was the largest beneficiary, sources suggested that the interim dividend henceforward, may not be “as good as in the past”.

“Our (cash) reserves have depleted considerably while huge capital expenses to scale up dispatches as well as improve mine productivity is underway besides other projects. So, we need to keep a substantial part of our reserves as capital expenses and finance some of the upcoming projects”, a senior Coal India executive said.

This year, the company had decided to upgrade its mines as well as invest in mine productivity, which would entail an investment of Rs 125 billion. Besides, its ongoing project to develop coal corridors for better evacuation of coal via the rail network, will also be expenses more than Rs 50 billion. Once these railway links become fully operational, it will raise Coal India’s evacuation capability by 100 million tonne.

Executives added that the company will also be opting for direct ownership of railway wagons, which again will involve substantial investment.

Moreover, it is also partnering with NTPC to develop pit-head power generation stations in remote locations where evacuation is a big challenge. It is also expected to expand its operations in Australia as well to secure coking coal mining rights.

It is estimated that Coal India’s current cash reserves are to around Rs 300 billion which is spread across its subsidiary units.

During 2017-18, the government had received over Rs 80 billion at the rate of Rs 16.50 per share as dividend from the world’s largest coal miner.

Incidentally, the dividend payout of Rs 32.87 billion to the government nearly matches a stake of 2.21 per cent of Coal India. Earlier this month, the centre sold this percentage of stake to Central Public Sector Enterprise Exchange Traded Fund’s (CPSE ETF) mutual fund scheme at a discounted rate, which further helped it to raise Rs 32 billion.

In October-November this year, against a total offer to sell a nine per cent stake, which included an oversubscription option, the government managed to sell 3.19 per cent of its stake. 

It was followed by another tranche of sale, when 0.45 per cent of the stakes were offered to employees. However, that sale also fetched a lukewarm response as not even one per cent of the offered shares were finally bought by the company staff.