Struggling to raise non-tax revenue before the fiscal year closes in three months, the NDA government plans to put off the 10 per cent disinvestment in Coal India through OFS route and instead, compel the state-owned miner to buy back the shares using its war chest.
The Prime Minister’s Office sent a message last week to Coal India to explore the possibility of buying back 10 per cent shares even as finance ministry is readying a list of lead managers and book runners (LMBR) for the offer-for-sale (OFS) that was approved by the Cabinet Committee on Economic Affairs last month.
Sources said the PMO’s concern is that the OFS route would take at least three months thereby missing the March 31 deadline and, could also run into rough weather considering that the already weak markets
could get hammered further closer to the time of auction.
Concerns were also raised over a possible hike in interest rates by the US Federal Reserve in December that could threaten markets outside the US and thus impact the Coal India OFS.
Already, some potential foreign investors have backtracked citing pressure from green activists not to touch polluting companies at a time climate change is engaging global attention. And, all global merchant bankers have stayed away from the LMBR lineup leaving the business for domestic bankers.
The PMO, said sources, views the buyback more assuring considering that it could be completed well within the deadline without getting affected by market fluctuations. The genesis of the buyback, they said, was the large kitty of Rs 34,000 crore that the state-run enterprise holds as reserves and surplus.
At Rs 300 per share, the government hopes to garner nearly Rs 19,000 crore through the buyback. Coal India shares closed at Rs 310 per share on Thursday.
However, Coal India officials say that the PMO advisory to use its reserves for the buyback disregards the company’s future project investment of Rs 57,000 crore over the next five years to ramp up its coal output to one billion tonnes by 2019-20 from last year’s 494.80 million tonnes.
Coal India stake sale is part of NDA’s aim to raise Rs 69,500 crore by March 2016 from selling minority stakes in state-owned companies. It has so far raised Rs 12,700 crore, or less than 20 per cent of its target. In January, the government divested 10 per cent stake in Coal India to bring down its holding to
79.65 per cent.