New Delhi, April 06: Coal India Ltd, the world’s largest coal producer by output, expects to launch its initial public offer (IPO) in July and list its shares in August, the state-run company’s chairman said.
The IPO will be part of the Indian government’s plan to raise funds for social-welfare and infrastructure projects by selling stakes in state-run companies. It proposes to sell 10 percent of Coal India, including 1 percent to the miner’s employees, to raise about Rs 120 billion (USD 2.7 billion).
“We aim to launch an initial public offering by the end of July and close the process by Aug. 12,” Partha Bhattacharyya told a news conference organised late Monday to announce the company’s provisional performance for the fiscal year ended March 31.
“Although the entire proceeds of the IPO will go to the government, Coal India will gain in terms of better governance as 50 percent of the board will comprise independent directors (under listing guidelines),” he said. “It will increase public accountability.”
Bhattacharyya said he expects a “good response” to the share sale as the miner has about 63 billion tonnes of coal reserves and demand for the fuel is unconstrained.
Many Indian power producers, which use coal to run their plants, import coal as the local supply isn’t enough. Demand for the fuel is expected to rise further as the country is increasing its electricity-generation capacity at a fast pace to fight chronic power shortages in Asia’s third-largest economy.
Bhattacharyya said he expects higher demand from the power sector to push coal imports to up to 100 million tonnes in the current financial year from about 80 million tonnes last year. The projection includes both thermal coal and coke.
Coal India itself may import about 6 million-8 million tonnes of coal, he said. “This would be the first time ever that we will import coal.”
Locally, Coal India aims to raise output by 7 percent to 461.5 million tonnes in the current financial year, Bhattacharyya said.
The company is expected to gain from improving the quality of coal it sells as it is setting up 20 washeries with a capacity of 111.1 million tonnes at a cost of $480 million. Washing of coal will reduce its ash content by 6 percent and increase calorific value, helping Coal India to raise prices from the current average of USD 20 a tonnes.
Similar coal fetches about $45 a tonne internationally, he said.
Investment Plans
Coal India, which has a cash reserve of Rs 350 billion, plans to raise its capital expenditure by more than a third to Rs 38 billion in the current financial year and has set aside another Rs 60 billion to acquire coal assets overseas, Bhattacharyya said.
It is evaluating 10 proposals, including equity stakes in mining projects with long-term sourcing arrangements and new joint-venture projects from global miners.
Among them is a proposal from US-based Peabody Energy Corp for stakes in some projects and joint ventures, Bhattacharyya said.
“We are in the process of appointing merchant bankers to do the due diligence,” he said on the company’s talks with Peabody Energy. “Once the due diligence is done, we will take three-four months to take a final call.”
–Agencies