Coal India to divest govt stake via IPO within a year

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS Coal India plans two-phase 15% disinvestment Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Commenting on the company's initial public offer (IPO) plans, Partha S Bhattacharyya, Chairman, Coal India (CIL), says, "We see a one-year timeframe for the IPO. It will primarily be from disinvestment of government stake."

On the possible coal price hike, he said, coal in India was priced at 50% of international rate. Thus, he saw a case for some hike in prices.

Here is a verbatim transcript of the exclusive interview with Partha S Bhattacharyya on CNBC-TV18. Also watch the accompanying video.

Q: Are there any plans to hike coal prices and if so, by how much?

A: We try to keep coal prices as low as possible. They where regulated till 1999 and since January 2000, it is in a deregulated format. Coal India decides its own prices but of course in consultation with the government. Over the last nine years, Indian coal prices have risen by 3.5% per annum so far. As a result today we are selling coal at prices which are 15% lower than what it used to in the year 2000, if you adjust for inflation. Coal in India is priced at 50% of international prices after adjustment for quality variances. So this is what we bring on the table.  

Q: Could you specify how much of a price increase we could see in coking coal and non-coking coal and how soon could it be put out? Would it also apply to customers who already have a fixed price contract?

A: Customers don't have any fixed price contract. The price as far as the full supply agreement is concerned says that it is the price notified by Coal India Limited from time-to-time-that's how the prices are fixed. Now, as I was saying there is a huge cost push factor because of the revision of wages and salaries of officers and executives-the total number of which is 4,10,000 in this company. We are trying to absorb as much as possible through productivity improvement and production increases but there is a case for certain amount of revision in coal price, so that we can protect our bottomline.

Q: How much is that?

A: Not much. It will be modest. I cannot specify the number at this point in time but I can only say that even if it happens it will be modest.

Q: Can you give us some clarity also on when you're planning to make company public-have you heard from the government?

A: We were given the Navrantna status in October 2008 and one of the conditions of Navrantna is to go for listing within three-years i.e. by October 2011. But we have already started the process of discussions with the Disinvestment Department and the Ministry of Coal. We have got certain basic clearances already from the government-Coal India is getting converted into a public limited company. It was a private limited company earlier. The shares are being split. The face value of shares, which was Rs 1,000 is being spilt into Rs 10 to improve the retail affordability. So these preparatory actions are being taken.

Q: Could you give us some time indication as to when you will file a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI)? What's your internal timeline to submit that document?

A: The internal timeline, before that we may have to go for the issue to the employees and also to a trust which will hold shares for the land losers because land is absolutely raw material for Coal India, we need to acquire 40,000-50,000 acre of land every year. We have to have very strong resettlement rehabilitation policy and we would like to make use of this listing of shares to make certain number of shares available for land losers. So we have to make those prior issues first and then go for the IPO. The IPO will be primarily from disinvestment of government shares. 

Q: So approximately what would that be? Would that be the second-half or would that be before 2009 is out that you will be able to issue these shares to the land losers?

A: I don't see it happen in 2009-10 fiscal but may be early 2010 we could go for employees and land losers and later part of 2010 we go for the public issue. I see a one-year kind of timeline.