No clarity as yet on CIL?s proposed FPO, says Rao

Coal India (CIL) board will not be able to decide on giving a special dividend to the government unless there is clarity on whether the government is going to hold back the divestment proposal.

Five trade unions have been pressing for withdrawal of the divestment proposal, which the government first thought to be 10% and later brought it down to 5%. But the government has not yet taken the final decision whether it would continue with the proposed CIL follow on public offer or withdraw it.

?The government has been thinking of raising funds in two ways ? divestment and a combination of buy back and special dividend. But there is no clarity as yet as to what the government wants to do,? CIL chairman S Narsing Rao said, adding that the board cannot take call on special dividend unless the disinvestment department decides to withdraw the stake sale. But the company would pay an interim dividend at the end of the third quarter, which could fetch the government above R5,000 crore.

?Last year we paid the government an interim dividend of 97% of our total paid up capital. The year before we paid an interim dividend of 95% of our total paid up capital. We will not be able to say now how much interim dividend we will pay to the government this year but surely it will fetch revenue to the government,? Rao said.

CIL?s current paid up capital is R 5,684.724 crore. However, an official said to pay a higher dividend or special dividend CIL would first have to exercise the buyback option because higher dividend can be paid by owning higher number of shares.

If the government finally asks CIL to give a special dividend the Maharatna company would have to extend something around R10,000 crore, which would be more than its paid up capital. Although the dividend is capped up to 30% of the net profit, the company would be required to strike a balance between its paid up capital and dividend payout, an official said.

CIL clocked a profit of R24,000 crore last fiscal and paid a regular dividend of R8,000. While there are fears that CIL?s profitability this year may come down because of lower than targeted production and off take, Rao said production would not impact dividend payout.

CIL?s production for the first eight months of the fiscal was 14.97 million tonne below the targeted 289.38 million tonne.

This could adversely impact profitability. Rao said there was opportunity for production to pick up during the third and fourth quarter. Even a lesser revenue generation between R300 and R500 crore would not impact dividend payout.

An official said there were chances that CIL marks up the price of power grade coal to make up for the revenue losses.