The government has urged market regulator Sebi to expedite regulatory approvals for Coal India?s (CIL) initial public offer (IPO) to avoid the company turning non-compliant with listing norms as four of its five independent directors move out on August 23. If Sebi does not approve the draft red herring prospectus (DRHP) to be filed by Coal India next week, prior to the exit of the four independent directors, disinvestment in the mining major would have to be deferred to the next fiscal, a prospect that could jeopardise the government?s plan to raise Rs 40,000 crore from PSU stake sales this fiscal.
CIL?s IPO is expected to be the biggest public offering by an Indian company so far, with proceeds estimated at Rs 15,000 crore.
As per Sebi norms, 50% of directors on the board of a company wanting to list should be independent, if the chairman is a functional director.
?The tenure of four independent directors of CIL? Arvind Pande, SK Barua, S Murarui and PK Banerjee?will come to an end on August 23, leaving only one independent director on the company?s 12-member board, making it non-compliant with Sebi norms. So, only if Sebi approves the DRHP before the independent directors? exit, can the IPO take place this year,? an official source said.
The CIL board will meet on Thursday to complete the formalities for filing the prospectus.
It remains to be seen whether the market regulator will toe the government line to provide faster-than-usual approval to the CIL offer. In the past, the regulator had denied such exemptions, including the follow-on-public offer of NMDC. It had insisted that government-owned companies will have to follow the same procedures as privately-run companies while tapping the markets. Sebi had even turned down the disinvestment department?s request to suspend trading in derivative segment of NTPC to insulate it from price volatility when it tapped the market through a follow-on public offer.
The government has decided to follow the book-building process in the Rs 15,000-crore CIL issue as investment bankers and several disinvestment department officials raised apprehensions about the success of the French auction route.
Market analysts had blamed the French auction method followed in NTPC and NMDC follow-on offer when the companies fetched valuations below expectations. Under the book-building route, the investors will be provided a price band instead of the floor price above which investors are expected to bid in the French auction method.