Divestment of CIL: Country's largest IPO gets Cabinet approval to hit market by september

The Cabinet Committee on Economic Affairs (CCEA), today, accorded its approval for the proposed divestment of the Government of India`s (GoI) stake in the state-run Coal India Limited (CIL). The government plans to raise around Rs 16,000 crore, via the sale of a 10% stake, out of its total holding of 100%, through a book building process, from the domestic market. Approximately, 63,16,36,440 shares have been proposed to be offered through this IPO.

One percent of the equity has been reserved for employees of CIL and its eight subsidiaries who will also receive a 5% concession on market price. In order to encourage greater public participation in the process, CCEA has also decided to offer a 5% price discount to even retail investors. At present, the paid up equity capital of the company stands at Rs 6,316.36 crore, and the Government of India holds 100% of the equity in the company.The Department of Disinvestment has, at this time, invited proposals from reputed merchant banks to act as Book Running Lead Managers (BRLM), to assist and advise the central government during the entire process of divestment of equity. 

Subsequent to cabinet approval, the much-awaited initial public offer (IPO) of the country`s largest coal producer, Coal India Limited (CIL), is now slated to hit the capital markets by the end of September 2010, more or less as per its original schedule. The future of the offer was, earlier, in doubt, owing to opposition from trade unions, with whom CIL is now reported to have reached an agreement, to initiate the divestment process in the form of what is expected to be the biggest IPO, so far, by any state-owned company in India. 

In the recently concluded 2009-10 fiscal, the coal major posted a 399.88% surge in its profit after tax (PAT), which reached Rs 8,312.40 crore for the financial year 2009-10, against the profit of Rs 2,078.70 crore recorded a year ago. The net worth of the company also went up, from Rs 19,165.04 crore at the end of 2008-09, to Rs 24,541.01 crore. The company achieved 6.8% growth in coal production during the fiscal, by producing 431.267 million tonnes (MT) of coal. Pertinently, CIL contributed a total of Rs 7,020.51 crore, in the form of corporate tax, dividend and dividend tax, to the central exchequer during the just-ended fiscal, as against Rs 5,920.15 crore paid during 2008-09.