Sunday, September 13, 2009

Indian Govt Begins Valuation of Coal India Ltd. for IPO

. Sunday, September 13, 2009

By stockOzone team

The department of divestment has undertaken a valuation exercise of Coal India’s (CIL) shares ahead of its proposed initial public offer.The Centre intends to divest 10% in the coal behemoth.

Although officials are tight-lipped about the developments, CIL — a 100% government-owned company — has reduced the face value of its existing shares of Rs 1,000 each into 100 shares of Rs 10 each.

CIL’s paid up capital stands at Rs 6,316 crore, and the number of shares following the stock split stands at 631.6 crore. The valuation exercise being undertaken will provide the government an idea on the amount it can raise from the primary market through the IPO.

“Coal India had requested the ministry of coal to ascertain the fair value of CIL shares. The ministry in turn has now forwarded the request to the department of divestment, which is undertaking the exercise. It will help CIL decided on the IPO offer price,” said a senior CIL official.

A part of CIL stock will be kept aside for distribution to land owners, who gives up their plots for new mine development. A portion of the stocks will also be offered to the existing employees of CIL.

The coal major needs to acquire land at the rate of 40,000-50,000 acres every year to maintain coal production growth.

As part of the land acquisition norm it currently offers jobs to one of the members of a family and also pays cash, against the land acquisition. With land acquisition getting more and more sensitive, it plans to compensate land owners by offering CIL shares, so that they can be partners in the growth of the company.

Disclosure: Author does not own any of the stocks discussed here.

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