Coal India shares nosedive 5% on govt stake sale plan

Shares of state-owned Coal India extended fall for the second straight session and tumbled nearly 5% in opening trade on Thursday after the central government proposed to sell 3% stake in the world’s largest coal mining company, which is expected to fetch around ₹4,000 crore to the exchequer. The government, which holds 66.13% stake in the company, will offload the share via an offer-for-sale (OFS) at ₹225 per share, a discount of 6.7% to Wednesday’s closing price. The counter settled 1.20% lower at ₹241.20 apiece on BSE in the previous session.

As per the exchange filing, the government plans to offload 9.24 crore shares, or 1.5% stake, in CIL. Adding to it, there will be a green shoe option for selling an equal amount of stake in case of over subscription.

The OFS will open on June 1 for non-retail investors and for retail investors on June 2. “Those investors other than Retail Investors ("Non-Retail Investors") who have placed their bids on T day and have chosen to carry forward their bids to T+ 1 day, shall be allowed to revise their bids on T+1 day as per the SEBI OFS Circular,” CIL said in a BSE filing on Wednesday.

Reacting to the news, Coal India shares opened 4.5% lower at ₹230.5 and slipped as much as 4.8% to ₹229.65 on the BSE. The market capitalisation dropped to 1.42 lakh crore.

The share price of Coal India is currently down nearly 13% from its 52-week high of ₹263.30 touched on November 9, 2022, whereas it trades 31.5% higher than its 52-week low of ₹174.60 hit on June 20, 2022.

On Tuesday, the board of CIL approved raising the prices of its high-grade (G2 to G10) non-coking coal by 8% with effect from May 31. This was the first hike in non-coking coal prices in the last five years since 2018, which will be implemented across all its subsidiaries.

The price hike is expected to generate incremental revenue of ₹2,703 crore for the balance period of financial year 2023-24, which will help the state-owned company to offset 50% higher employee cost post wage hike announced in January 2023. 

The development came merely a week after the CIL approved a new wage agreement allowing higher allowances and benefits for non-executive employees. On May 22, CIL said in a regulatory filing that it inked national coal wage agreement with its 2.38 lakh strong non-executive workers for the period of five years, effective from July 1, 2021. As per the agreement, a minimum of 19% guaranteed benefit on emoluments (basic, VDA, SDA & attendance bonus) and a 25% increase in allowances have been granted to non-executive employees. Further, CIL has made provision of ₹9,252.24 crore for a period of 21 Months from July 1, 2021 to March 31, 2023, for this effect.

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