U.K.-based The Children’s Investment Fund Management (TCI) has asked Coal India Ltd. (CIL) to increase its dividend payout to 100 per cent from this fiscal, saying that this would allow CIL to deliver decent returns.
TCI, which is the single largest shareholder of CIL (with a holding of less than two per cent), said that CIL’s share price had been flat since its listing, and accused the PSU of mismanaging its capital.
TCI communicated this through a letter that was sent to all the directors of CIL. The letter comes ahead of a CIL board meeting next month, when an interim dividend is set to be considered.
“We believe that the directors of CIL are in breach of their fiduciary duties (including their duty to act in the best interests of all shareholders) by hoarding an absurd amount of cash that is far above any realistic business needs,” the letter said
TCI also said that CIL had close to Rs. 65,000 crore in cash, equivalent to 30 per cent of CIL’s market capitalisation.
Some of the CIL’s functional directors, however, spoke to The Hindu said that while as a shareholder TCI could seek higher payouts, it was beyond its scope to talk of CIL’s fiduciary duties.
TCI became CIL’s second largest shareholder after it subscribed to CIL’s equity during the latter’s IPO in October 2010.
Since then, the fund has been making its presence felt. Last year, it dragged CIL and the Government of India to Court, alleging failure to perform their fiduciary duties.
It had also said that a partial rollback of prices had led to huge loss of profits for Coal India Ltd.