KOLKATA: The coal ministry is not in favour of divesting 10% stake in Coal India’s subsidiaries, as proposed by the divestment department, as it will only infuse more funds into the cash-rich coal giant, a senior ministry official told ET.
“We are not in favour of this divestment proposal. If the subsidiaries are listed, the money that comes from divestment will go to Coal India and not to the government, because CIL is the owner of these subsidiaries,” coal secretary Alok Perti said.
The department of divestment wants state-run Coal India Ltd (CIL) to divest stake in its six profit-making subsidiaries: Central Coalfields, Mahanadi Coalfields, South Eastern Coalfields, Northern Coalfields and Western Coalfields. CIL’s consultancy wing, Central Mine Planning and Design Institute, is also being considered for divestment.
“CIL is a cash-rich company and if the government wants additional money from CIL it may take it in the form of special dividends. There will not be any separate requirement for divestment of the subsidiaries,” Perti added.
The divestment proposal includes listing the profit-making companies of CIL, which Perti said “would affect CIL’s valuation”.
“The department of divestment has scheduled a meeting next week where they intend to look at the possibility of divesting profit-making subsidiaries of pubic sector companies. The list includes Coal India Limited subsidiaries. However, we feel these subsidiaries should not be included,” he said.
A senior director of CIL gave a similar view.
“The Coal India IPO was done on the basis of the strength of its subsidiaries. The value of the scrip was decided on a consolidated basis, which included the value of the subsidiary companies too. If these subsidiaries are listed, the parent company will see a decline in its valuation.”
CIL’s cash balance as on March 31 stood at about 56,000 crore. It was 45,000 crore on March 31, 2011.
Coal India is a holding company that sells coal produced by its subsidiaries and takes care of investments and procurements.
It has nine subsidiaries, including Coal India Africana Limitada in Mozambique. The loss-making subsidiaries that are being excluded from the sell off plan are Eastern Coalfields and Bharat Coking Coal.
“The IPO met with heavy resistance from unions. During that period, the management had promised the divestment of CIL would be restricted to 10% only. This promise will be dishonoured if the subsidiaries are divested too,” a senior CIL official said.
In 2010-11, CIL’s six profit-making subsidiaries together posted a profit before tax of over 14,700 crore. MCL ( 4,039 crore), NCL ( 3,956 crore) and SECL ( 3,777 crore) were the major profit churners.
CCL and WCL posted a PBT of 1,860 crore and 1,068 crore respectively. CMPDI, being a consultancy wing, has a smaller balance sheet and posted approximately 24-crore profit.