Coal India should pay 100 pc of its profits as dividends: TCI

KOLKATA: The Children’s Investment Fund Management, the UK-based fund that holds about 1 per cent stake in Coal India, has said the state-run miner should pay out 100 per cent of its profits as dividends, or at least Rs 30 a share.

According to the fund, Coal India’s Rs 65,000 crore cashpile, which is equivalent to 30 per cent of the company’s market capitalisation, allows such a payout.

"This proves a lack of capital discipline. Free cash flow before dividends, including all capital expenditures, is in line with net profits, hence there is no need for additional cash to be held on CIL’s balance sheet," Oscar Veldhuijzen, partner, The Children’s Investment (TCI), said in a letter to the directors of Coal India.

This is not the first instance of Coal India coming under pressure from the fund on how the company should be run. Last year, the investor had moved the Delhi High Court against the coal ministry’s directive to Coal India to roll back a price hike.

"This is a function of Indian GAAP which deducts non-cash items such as overburden removal provisions from net profits, which are in line with expansion capital expenditures," Veldhuijzen said.