Finance ministry invites bids from banks to manage 5% selloff in Coal India

NEW DELHI: The finance ministry on Thursday invited application from merchant bankers to manage 5% divestment in state-run Coal India. The 5% stake sale will fetch the government around Rs 8,500 crore, only half of the original amount the disinvestment department had hoped to raise from the company to meet its ambitious Rs 40,000 crore target for the year.

So far the government has raised over Rs 1,300 crore through PSU stake sale.

Coal India was the bedrock of the disinvestment programme in the current year and a 10% stake sale was expected to fetch around Rs 17,000 crore. The union cabinet deferred a decision on disinvestment in NHPC. A finance ministry official told ETthat the administrative ministry will be asked to consider a 5% buyback in Coal India in addition to the stake sale.

“They have problems with the unions. It is for them to decide the timing of the buyback,” he said, requesting anonymity. Already a trade union has served notice to the company for a threeday strike beginning September 19.

The disinvestment department in its notification only noted that the government intends to disinvest 5% of paid-up equity capital or over 31.58 crore shares of CIL, through Offer for Sale of shares by promoters through the stock exchanges.

The government currently holds 90% stake in CIL. The government will select up to seven merchant bankers for managing the disinvestment and has invited bids from them by August 26.

The government would also allot shares to CIL employees at a discount of 5% to the lowest cut-off price up to a maximum of 10% of the OFS size following completion of the disinvestment.

Finance Minister P Chidambaram had earlier tried to assuage the workers union saying the disinvestment proceeds from the coal behemoth will be invested in PSU banks.

“...I told Coal India people, every rupee that we get out of Coal India I am willing to put it in public sector banks... So we are not converting assets into current expenditure. We are converting one asset into another asset,” he had said. CIL got listed on the bourses in 2010 through an initial public offering in which the government raised Rs 15,199 crore by selling 10% stake.

Meanwhile, the government has cleared the decks for setting up India’s first women’s bank, Bhartiya Mahila Bank. The cabinet has sanctioned Rs 1,000 crore to set up the bank. The FM had proposed the move in his budget speech.

Earlier, minister of state for finance Namo Narain Meena had said the government has finalised the proposal to start the Bhartiya Mahila Bank with six branches.