Coal India eyes 25 pct rise in profit

The company has set aside $1.2 billion for overseas acquisitions this fiscal year.

Coal India,the world’s largest coal miner that plans to raise up to $3.5 billion through an initial public offering,expects a 25 per cent rise in profit this fiscal year,its chairman said on Wednesday.

“We will go for washing of coal in a big way. Margin growth will be dominant focus,” Partha Bhattacharyya said at a news conference to announce the details of the share offering.

He also said the company has set aside $1.2 billion for overseas acquisitions this fiscal year. The state-owned firm is evaluating a “couple of proposals” for buying stakes in overseas coal companies,he said.

On Tuesday,the Indian government set a price band of Rs 225 to Rs 245 a share for Coal India IPO that opens next week.

Priced at the top end of the band,the company would be valued at $35 billion,placing it among the top ten Indian firms by market value. Brokerages have valued the IPO at $45 billion,indicating a 30-per cent premium.

The IPO,part of India’s broader effort to divest stakes in roughly 60 state-run companies in the next few years,will be the largest in the country’s corporate history.

Coal India,founded in 1973 when the government nationalised many coal mines,made a net profit of Rs 98.34 billion ($2.2 billion) in 2009/10 (April-March) on revenue of Rs 525.92 billion ($11.8 billion).

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The company reported earnings per share of Rs 15.60 for the fiscal year ended March 2010 and would be valued at 15.7 times trailing earnings if priced at the top end of the Rs 225-Rs 245 a share price band.

Morgan Stanley,Citigroup,Kotak Mahindra Capital,Enam Securities,Deutsche Bank and Bank of America-Merrill Lynch are managers on the offer.

Coal powers 75 per cent of India’s electricity output and demand is expected to grow 11 per cent a year. India faces a peak-hour power deficit of nearly 14 per cent and plans to triple its generation capacity over the next decade.

Coal India,based in the eastern city of Kolkata,produced 431 million tonnes in 2009/10 and accounts for nearly 80 per cent of coal output in Asia’s third-largest economy.