Coal India’s share buyback plan, through which the central government is looking forward to raise Rs 3,650 crores, would commence on 3rd October. This process of trading would close on 18th October. The last date of extinguishment of equity shares, however, has been fixed as 28thOctober, which will give the company enough time to analyze the trends.
To proceed with the plan, Coal India has appointed SBI Capital Markets as the manager of buyback plan and along with it has created an escrow account with Axis Bank, where it will be depositing Rs 380 crores before the buyback offer starts.
This offer would be for buyback of equity shares up to 1,08,955,223 with a face value of Rs 10 each at a price of Rs 335 for every equity share for cash aggregating up to Rs 3,650 crores on a proportionate basis, from the eligible shareholders with the help of a tender offer through the stock exchange mechanism.
The size of the issue represents approximately 24.95% of the fully paid-up share capital as well as free reserves, according to the company’s audited accounts for the Financial Year 2015.
The trading will be open to the public where the ratio of the buyback for the small shareholders have been fixed at five equity shares for every 22 equity shares held by such small shareholders, on the other hand, five equity shares for every 337 equity shares held by institutions or other larger stakeholders in the company.
If all the public shareholders are able to participate up to their entitlement (full acceptance), then the aggregate shareholding of the promoter, which is the President of India, post the buyback will increase from 79.649% to 79.845%. The aggregate shareholding of the public in the company shall decrease from 20.351% to 20.155% after the buyback, Coal India said in a filing with Bombay Stock Exchange.
However, if none of the public shareholders participate, then the aggregate shareholding of the Indian President, after the buyback will decrease from 79.649% to 79.293%. The aggregate shareholding of the public in the company shall increase from 20.351% to 20.707% after the buyback equity share capital of the company.
According to company, the objective of this buyback is to return surplus cash to all the members holding equity shares of the company (in this case the centre).
As added by a senior Coal India official, this buyback, which is being implemented through the Tender Offer route, would involve around 15% of the number of shares to be bought back, reserved for the small shareholders.
He also added the buyback may help to improve the return on equity, by reduction in the equity base, thereby leading to long term increase in shareholders’ value.
The official further said, the buyback is not likely to have any negative impact on the company’s profitability or its earnings, additionally it will reduce the Company’s investment income by Rs. 3.650 crores if the company considers buying back the entire number of shares in the offer.
However, regulations prohibit Coal India not to raise further capital out of its own accord for a period of one year from the closure of buyback except in discharge of its subsisting obligations.
A coal official clarified the fact that although the company may not be able to raise anymore fund for one year as per the obligations, the promoters can implying that the Company’s cash flow and investment plans will not be hampered.
By the end of today’s trading session Coal India share price closed at Rs 322.30, down by 1.42 per cent. The intraday high and the intraday low of the share are Rs 328.80 and Rs 316.90 respectively. A total of 44,45,950 shares of the Company have been traded on the counter of NSE aggregating to a total amount of Rs 14,263.94 lacs.
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