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At a meeting here on October 9, the board of directors of state-owned Coal India Ltd (CIL) is likely to formally take up a proposal for a share buyback to raise about Rs 10,000 crore.
“The board is meeting on October 9. The share buyback proposal is likely to come up in the meeting, among other things,” a senior official close to the development told Business standard. Sources said the agenda for the meeting also included finalisation of the import tender.
Some indicated a final decision on the share buyback might not be taken on October 9. “There were no independent directors in the company since August 23. Usually, such important decisions are taken by a full board. The independent directors are joining this month. As there would be new people on the board, it may take a couple of board meetings to take a final call in this matter,” said another official.
CIL had six independent directors, against an approved strength of seven. Chairman and Managing Director S Narsing Rao said all the independent directors would join by October-end. However, the company’s website shows none of the independent directors have joined yet.
Recently, Rao had said the share buyback proposal had been discussed by the board “informally”. If the issue is discussed at the October 9 board meeting, it would be the first time it would be taken up in a formal manner.
At CIL’s annual general meeting last year, the company’s articles of association were amended to enable a share buyback. Under the buyback route, the government can raise money by selling a part of its equity holding in a company to the public sector enterprise concerned. The government makes the company use its cash reserves to buy back the shares of the promoter (the government). In the process, money is transferred from the company to the government.
CIL has a cash reserve of Rs 62,000 crore, the highest among all public sector undertakings.
CIL was listed on the bourses in 2010, after the government raised Rs 15,199 crore by selling 10% stake in the country’s biggest initial public offering. Currently, the government holds 90% stake in the company.
