Foreign investors want govt to defer Coal India stake sale

Some say they may mull selling their holding since the share price could plummet further if disinvestment happens soon

Opposing an immediate stake sale in Coal India Ltd, foreign investors have told the Finance Ministry that further disinvestment in the coal miner should be put off as the current market valuation is low.

Foreign investors such as Fidelity, Wellington Management and BlackRock have also conveyed that they might look at selling their holding in Coal India since the share price could plummet further in case the disinvestment happens soon, sources told PTI.

The Cabinet had last month approved a 10 per cent disinvestment in Coal India, which could fetch about Rs 20,000 crore at the current market prices.

"Long-term investors have clearly told the Disinvestment Department that stake sale should not happen now as valuations are very low. They have said they will not invest and rather sell their current investments if government proceeds with stake sale," a source said.

The Department of Disinvestment (DoD) is also of the view that current market scenario is not conducive to a major stake sale like that of Coal India.

"In today's date, there is no scope for Coal India," an official said.

In January, the government had sold 10 per cent stake in the company at a floor price of Rs 358 a piece. The stake sale had fetched about Rs 22,600 crore to the exchequer.

However, the share price of the PSU has declined over 14 per cent since then and has come down to Rs 307.

The government had last month shortlisted five Indian merchant bankers including JM Financial, SBI Capital and ICICI Securities for managing the over Rs 20,000-crore stake sale in Coal India.

"Foreign bankers like Deutsche, Citi, Morgan Stanley were all interested to bid for managing Coal India stake sale. But the international lobby on environment is so strong that they could not bid. HSBC bid in anticipation, but they did not get approval and hence had to withdraw at the last moment," the official added.

Global investment bankers have flagged concerns over Coal India allegedly not meeting green commitments. It had in 2013 committed to a Sustainable Development Policy under which the Maharatna PSU has to pursue mining, integrating environmental, socio-cultural and economic factors.

According to sources, during recent overseas roadshows, the investors gave a presentation to the government on Coal India.

"The investors flagged bloated salary bills compared to peers, very low productivity and declining return on equity compared to peers as their concern," sources said.