Coal India plans buyback of its shares

Soon after filling up its coffers by offloading the shares of its subsidiaries, Coal India is set to make the government richer.

The state-owned mining major has decided to go for buyback of its shares and a meeting of the Board of directors has been convened on July 11 to take a final call, Coal India said on Tuesday.

"A meeting of the Board of directors will be held on July 11 to consider the proposal for buyback of equity shares of the company," the company has said.

While Coal India has not specified the quantum of the buyback, sources said it would be about 5% of its issued capital.

The government would be the biggest beneficiary of the proposed buyback as it holds 79.65% stake in Coal India followed by foreign institutional investors (8.52%) and Life Insurance Corp (5.86%).

And with a cash reserve of Rs 38,300 crore, the proposed buyback won't strain its financial health, analysts said.

Also, the company has recently decided to shore up its cash balance by making its subsidiaries buy back their shares from the parent up to 25% of their respective equity capital.

So far, five of Coal India's subsidiaries - Central Coalfields, South Eastern Coalfields, Western Coalfields, Mahanadi Coalfields and Northern Coalfields – have approved of buyback of their shares from the parent for about 25% of their stocks thereby transferring cash residing on their books to the accounts of Coal India.

Reacting to Tuesday's decision to go for a buyback, Coal India's stock appreciated by 1.35% to close at Rs 321.75 on a day when the broader market, represented by Sensex, dropped 0.41%.

Coal India's shares are on an upswing from a level of Rs 307 since the company 12 announced the plans of its subsidiaries to buy back shares.

Recently, the stock got a boost on the news that its production in June grew 10% at 42.7 million tonne while offtake appreciated by 6.6% at 45 million tonne.

Coal India Ltd