Coal India Chairman Partha Bhattacharyya was bang on when he termed the trade unions’ successful bid to stop employees from participating in the company’s initial public offer (IPO) a tragedy. “The unions took the wrong call and that has been well proved,” the chairman said shortly after Coal India’s spectacular listing.
The wrong call is obvious and here’s why. Like retail investors, the over 400,000 employees, too, were eligible for a 5 per cent discount on the offer price of Rs 245. After the discount, the allotment price worked out to Rs 232.75 each. Consider this: of the total IPO size of 632 million shares, the portion reserved for employees was 63.2 million, or 10 per cent of the total offer.
However, the company received just 27,848 applications totalling 6.84 million shares from employees. The unsubscribed portion (or 56.3 million shares) was transferred to the public quota. Considering Coal India’s closing share price of Rs 343.35 the day it was listed, which translates into a gain of Rs 110.6 per share, employees of the coal giant have collectively lost about Rs 623 crore, though notionally.
Though unions are celebrating the success of their efforts to dissuade employees from subscribing to the IPO, it is a tragedy that while most Coal India employees missed out on a legitimate opportunity to own a small part their own company’s shares, others gained at their expense. It is ironic that foreign institutional investors, termed “foreign imperialist forces” by the unions, are the ones who will own a major chunk of the company’s shares.
The unions, which had earlier decided to go on a seven-day strike but later settled for a protest week for lack of consensus, say they are happy that employees have not been as greedy as the “ordinary middle class in the country” and decided to oppose the “illegal” disinvestment and privatisation in view of several Supreme Court observations that the natural resources of a country belong to its people.
The Bhartiya Mazdoor Sangh, one of the major trade unions in Coal India, discouraged employees from buying shares owing to fears that partial privatisation of the state-owned company could lead to job losses. Union’s General Secretary K Lakshma Reddy told Bloomberg that he sees the 10 per cent stake dilution as the first step towards privatisation and his experience is that with privatisation there is no job security. “Any fine morning, Coal India may close down,” Reddy said.
It is doubtful whether one has heard a more ridiculous argument.
There are five recognised trade unions in the company — the Indian National Trade Union Congress, the Centre of Indian Trade Unions, the All India Trade Union Congress, the Bhartiya Mazdoor Sangh and the Hind Mazdoor Sangh.
Coal India says it did a lot to help employees own a piece of their company. It decided to pay workers around Rs 5,000 crore in salary arrears to help them subscribe to the IPO. The payment was timed to make sure that the shares reserved for Coal India’s employees were sold out. The management also offered to open demat accounts free of cost for employees.
But the coal giant could have been more proactive since subsequent developments showed that applications of over 3,000 employees were rejected owing to certain anomalies in their applications. The Coal India management could have offered these employees a helping hand instead of just fretting over union opposition. For, most of the applications were rejected due to issues like multiple forms with common PAN, applications below discovered price, inactive demat accounts and applications with name mismatch.
But it is not only Coal India employees who gave their company’s IPO a cold shoulder. Even National Mineral Development Corporation employees bought only one in 20 shares reserved for them in the company’s issue. It was the same case with Satluj Jal Vidyut Nigam, which came out with an IPO earlier this year: three-fourths of the shares meant for employees went unsubscribed.
Such actions show why trade unions in general find themselves in steady decline. They can continue to believe in the impersonal forces of history as their ideological touchstone but the fact is that they will become even more irrelevant as a result of activities that nurtures vested interests at the cost of employee welfare.
So is it any surprise that in September this year, nearly 60 million workers in India went on strike, shutting down the banking, insurance, telecommunications and power companies to protest against disinvestment? Banking employees joined in to protest against the Reserve Bank of India’s plan to offer new banking licences and norms that allow foreign investment in banks.
Protesting against these issues may still be understandable, but barring employees from participating in an IPO takes the cake.
