NEW DELHI: UK-based hedge fund TCI has said it would initiate a legal action against state-run Coal India (CIL) within a week for failing to protect the interest of minority shareholders.
“We will file a law suit against CIL board within a week or so…,” Oscar Veldhuijzen, a partner at The Children’s Investment Fund (TCI), told PTI over phone from London.
The development comes close on the heels of CIL getting ready to ink fuel supply pacts with power firms for a minimum assured supply under a Presidential directive.
TCI is the biggest foreign investor in Coal India and has a minority stake in it. It has been accusing the PSU of not protecting minority shareholders’ interest and harming the company by not opposing such fuel supply pacts.
TCI has already announced that it has asked its Indian lawyers, Luthra & Luthra, to begin the process of launching legal action against CIL and its directors.
Veldhuijzen said TCI believes that large industrial companies had pushed the government to impose new fuel supply agreements (FSAs) on CIL at the cost of the company.
The government on April 3 had issued a Presidential directive to CIL to commit a minimum assured fuel supply to the power producers, failing which the company would be subject to paying a penalty
TCI had in a letter to CIL board last week said that the coal prices should be linked to market rates as it would increase Coal India’s profitability.
“We estimate that if CIL sells its FSA coal at market price levels, its profits will increase by $19 billion… Indian households consume close to 200 billion units of power per annum, which can entirely be paid for by dividend from Coal India,” it said in the letter.
Earlier in a letter, it had attacked the company and its board for “not acting independently of India’s government”. “The Republic of India’s recent conduct with respect to CIL has seriously impaired the business activities and operations of CIL,” it had added.
Following meetings of the power sector leaders in the Prime Minister’s Office early this year, the government issued a Presidential directive to CIL to commit a minimum of 80 per cent coal supply to the power producers.
As the government has a majority stake in CIL, it has powers to direct the company on a particular course of action.