 "Coal India's share buyback to commence on October 3")
The share buyback plan of Coal India, through which the central government intends to raise Rs 3,650 crore, would commence on October 3. The process of trading would close on October 18. The last date of extinguishment of equity shares, however, has been fixed as October 28, which will give the company enough time to analyse the trends.
To carry out the plan, Coal India has appointed SBI Capital Markets as the manager of the buyback plan and has created an escrow account with Axis Bank, where it will be depositing Rs 380 crore before the buyback offer commences.
The offer would be for buyback of equity shares up to 1,08,955,223 of face value of Rs 10 each at a price of Rs 335 per equity share for cash aggregating up to Rs 3,650 crore on a proportionate basis, from the eligible shareholders by way of a tender offer through the stock exchange mechanism.
The offer size represents approximately 24.95 per cent of the fully paid-up share capital and free reserves, according to the audited accounts of the company for the FY15.
While the trading will be open to the public, the ratio of the buyback in case of small shareholders has been fixed at five equity shares for every 22 equity shares held by such small shareholders and five equity shares for every 337 equity shares held by institutions and other larger stakeholders in the company.
In case all the public shareholders 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 per cent to 79.845 per cent and the aggregate shareholding of the public in the company shall decrease from 20.351 per cent to 20.155 per cent of the post the buyback, Coal India said in a filing with BSE.
However, in case none of the public shareholders participate, then the aggregate shareholding of the President of India, post the buyback will decrease from 79.649 per cent to 79.293 per cent and the aggregate shareholding of the public in the company shall increase from 20.351 per cent to 20.707 per cent of the post buyback equity share capital of the company.
As per the company, the objective of the buyback is to return surplus cash to the members holding equity shares of the company (in this case the centre).
According to a senior Coal India official, the buyback, which is being implemented through the Tender Offer route would involve 15 per cent of the number of shares to be bought back, reserved for the small shareholders.
“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”, a senior Coal India official said.
As per the official, the buyback is not likely to have any negative impact on the profitability or the company’s earnings, it will reduce Coal India’s investment income by Rs. 3.650 crore 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 that although the company may not be able to raise any fund for one year as per the obligations, the promoters can implying that Coal India's cash flow and investment plans will not be hampered.
