Not confident of raising Rs 17,000 crore through Offer For Sale (OFS) in Coal India, the government may ask the PSU to buy back a portion of the proposed 10 per cent share sale.
The 10 per cent stake sale may be split into Offer for Sale (OFS) and buyback in view of volatile market conditions, an official source said.
“In such weak markets in will be very difficult to raise Rs 17,000 crore in any other way. Coal India being a cash rich company, they could participate in the buyback and help government raise funds,” the source said.
The government currently holds 90 per cent stake in Coal India (CIL). At the current price, a sale of 56.84 crore shares, or 10 per cent of government holding, could fetch around Rs 17,000 crore to the exchequer.
Shares of CIL closed at Rs 294.90, up 0.15 per cent on the BSE.
“The fund to be mobilised through CIL stake sale is huge. Since foreign funds are not very bullish on India, it could be done through OFS and buyback to ensure that money comes to the exchequer,” the official said.
CIL will be the biggest disinvestment for the government in the 2013-14 fiscal. The government plans to raise Rs 40,000 crore by way of PSU stake sale this fiscal.
The Department of Disinvestment (DoD) has already floated a draft Cabinet note for seeking comments from administrative and other concerned ministries for a 10 per cent stake sale in CIL in tranches.
The DoD is awaiting opinion from the Coal Ministry for formulating the final Cabinet note.
Last year the government had directed all central PSUs to amend their Articles of Association to provide for buyback of shares, if such provisions did not exist.
It (the Articles of Association) states that if a CPSE decides to buyback its own shares from the shareholders using surplus cash, the DoD may offer Government’s equity in the firm on behalf of the Government.
Coal India, with a cash balance of about Rs 60,000 crore, would need approval of the board before going in for a buyback.
The DoD would soon invite bids from merchant bankers and legal advisers for managing the CIL stake sale.
CIL got listed on the bourses in 2010 through an initial public offering, through which the government raised Rs 15,199 crore by selling 10 per cent stake.