As part of the disinvestment process, state-owned Coal India Ltd (CIL) has approached the coal ministry for conversion of its status from a private to a public limited company. This is an important pre-condition for issuing shares to the public and listing on the stock exchanges. “A private limited company cannot have more than 50 shareholders and the right of transfer of shares is restricted,” a CIL official said.
In an attempt to raise revenues from divestment so as to keep a lid on its fiscal deficit, recorded at 6.2 per cent of GDP (gross domestic product), the government plans to ride piggyback on CIL’s IPO to divest up to 10 per cent of its holding.
CIL currently has six shareholders, including five nominee shareholders (from the coal ministry and CIL), with each of them holding one share of Rs 1,000. The government holds the balance 6.3 crore shares, with a face value of Rs 1,000.
“The size of CIL’s IPO is likely to be 10 per cent of the company’s paid-up capital along with 10 per cent divestment of equity by the government,” a senior government official said.
CIL has a equity base of Rs 6.3 crore with a face value of Rs 1,000 per share. Based on the 2007-08 earnings and a price earnings ratio of 10 (projected by market experts), the company will have a valuation of close to Rs 50,000 crore and at a 10 per cent dilution, would raise upto Rs 5,000 crore.