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Posts Tagged ‘Coal India’

Doubts on Coal India’s coal reserves

September 13, 2010 Comments off

“Coal India is set to begin a roadshow to promote what is expected to be India’s biggest stock listing, even as tightened environmental regulations and a Maoist insurgency threaten to render much of the state-owned miner’s reserves inaccessible. …

Coal India hopes to raise up to Rs150bn ($3.2bn) from the sale of a 10 per cent stake. That would make its initial public offering bigger than India’s largest completed listing, the $3bn offering of domestic electricity producer Reliance Power in early 2008. Coal India claims to be the world’s largest coal producer and accounts for 85 per cent of production in India, which has the fourth-largest reserves on the globe. But it recently revised down its annual production target from 520m tonnes to 486m tonnes, citing delays in environmental clearance for mine expansion. Meanwhile, Indian coal imports are surging, with KPMG estimating a domestic shortfall of 189m tonnes a year by 2015.”

Source: Financial Times, September 13, 2010

Observations:

  • The capital aimed to raise with the proposed IPO is $0.4bln higher than initially targeted. However, the uncertainty caused by changes in legislation have delayed the process by months since the rumours in June.
  • Coal India has 471 mines (March 2010) of which 273 are underground, 163 opencast and 35 mixed mines. CIL further operates 18 coal washeries, (12 coking coal and 6 non-coking coal). The many small operations are organized into 8 core geographical business units.

Implications:

  • A recent ruling on mining in areas populated by tribal people affected the plans of Vedanta to develop an iron ore mine in the state of Orissa. The Indian government is stepping up its efforts to protect the environment and human rights, changing the way many local mining companies have to operate. The amount of capital Coal India will be able to raise depends on the availability of its reserves in areas protected by these rulings.
  • Once a larger part of Coal India is made available to the public, large corporates in the Indian power industry and heavy industry (especially steel: ArcelorMittal, Reliance and Tata) are likely to acquire strategic stakes in the company to secure supplies.

©2010 | Wilfred Visser | thebusinessofmining.com

Coal India Moves Toward IPO

June 21, 2010 1 comment

“State-owned Coal India Ltd. is likely to file a draft prospectus in the second half of July for a proposed 130 billion rupee ($2.8 billion) initial public offering, a person with direct knowledge in the matter said.

The government is considering selling a 10% stake, or 631.64 million shares, in the company that produces more than 80% of the country’s coal requirement. It would be the largest stake sale by the federal government to date.

‘The work [on compiling the draft prospectus] is on. The company is working on complying with all capital market regulations including filling up board seats with independent directors, all of which could take another month to complete,’ the person said. The person said the company hopes to launch the IPO in September.

Source: Wall Street Journal, June 19 2010

Observations:

  • The Indian government is planning to spend the money raised through the IPO on infrastructure and social welfare projects.
  • Coal India has 471 mines (March 2010) of which 273 are underground, 163 opencast and 35 mixed mines. CIL further operates 18 coal washeries, (12 coking coal and 6 non-coking coal). The many small operations are organized into 8 core geographical business units.
  • The IPO will most likely take place in August, months ahead of previous analyst expectations. One of the key obstacles is the government regulation on issueing of shares to employees of subsiduaries.

Implications:

  • The IPO of the company will force the major diversified miners to evaluate their investments in India. Acquiring part of the coal miner could be a good way for the iron ore producers to form a strategic alliance with the Indian government and position for Indian growth.
  • As Coal India takes care of approx. 80% of the demand for coal in India, imports still are limited. However, the company will have to scale up production from its many small operations enormously in order to cope with the increasing demand in the coming decades.

Infomine: Coal Fields in India

©2010 – thebusinessofmining.com