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India accelerates $3.6bn Coal India stake sale
22 May, 2017, 10:30 IST
| Navi Mumbai, India
"The investment environment here has improved such a lot, and so the probability of success for this [Coal India] is now very high." -Nirmal Jain
India's government is pushing ahead aggressively with plans to raise around $3.6bn from the sale of a 10 per cent stake in state-backed mining group Coal India, taking advantage of buoyant local market that hit new record high today.
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James Crabtree reports that investor roadshows for the sale begin this week in Singapore and other global financial centres, according to three people familiar with the situation, as Prime Minister Narendra Modi races to raise revenue before the end of this fiscal year.
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The company was listed in 2010, and the stake sale will lower the government's holding to about 80 per cent.
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The Coal India divestment comes alongside a second move to raise around $3bn by off-loading a 5 per cent stake in public sector energy explorer Oil and Natural Gas Corporation, a sale that is likely to be launched in December.
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But Mr Modi's government is now pushing the Coal India sale to take advantage of strong demand from investors, who view Asia's third largest economy as one of the brightest prospect among major global emerging markets, those involved in the process say.
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On Monday, India's benchmark Sensex index again touched record levels, hitting 28,206 in afternoon trading. The Sensex has risen by 33 per cent this year, on economic optimism following Mr Modi's overwhelming victory in May's national elections.
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"The investment environment here has improved such a lot, and so the probability of success for this [Coal India] is now very high," says Nirmal Jain, founder and chairman of India Infoline, a Mumbai-based brokerage.
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The government wants to move quickly, to ensure its fiscal deficit targets are not only met, but exceeded. It could happen before Christmas, or if not then in January.
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Coal India's sale is being led by a consortium of banks, including Goldman Sachs, Credit Suisse, Bank of America Merrill Lynch and Deutsche Bank. The banks involved declined to comment.
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The urgency behind the sale comes as Mr Modi races to meet a self-imposed target to raise around $10bn from the sale of minority stakes in state-backed businesses.
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That goal in turn is a crucial component of his plans to cut India's fiscal deficit to 4.1 per cent of gross domestic product by March 2015.
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The sale is being accelerated despite a number of potential problems facing Coal India, the world's largest miner by output, including the fact that the position of chairman, the organisation's most senior executive, is currently vacant.
�
Regulatory issues affecting India's coal sector alongside trenchant objections from powerful trade unions present further issues, with labour leaders promising to being strike action in protest at the sale later this month.
�
Similar obstacles have repeatedly derailed attempts to sell stakes in Indian public sector companies, including an earlier attempt by the country's previous government to off-load a stake in Coal India, which ran into the ground last year.
�
However those involved in the current sale say that a combination of government determination to meet its fiscal targets and heightened investor enthusiasm for India means such obstacles are no longer "deal killers".
�
A senior figure familiar with the sale process, who asked not to be named, said:
�
The optimism around the country is such that I think this deal gets done, even with these problems. People want to own India at the moment. It is the best emerging market story out there.
�
James Crabtree reports that investor roadshows for the sale begin this week in Singapore and other global financial centres, according to three people familiar with the situation, as Prime Minister Narendra Modi races to raise revenue before the end of this fiscal year.
�
The company was listed in 2010, and the stake sale will lower the government's holding to about 80 per cent.
�
The Coal India divestment comes alongside a second move to raise around $3bn by off-loading a 5 per cent stake in public sector energy explorer Oil and Natural Gas Corporation, a sale that is likely to be launched in December.
�
But Mr Modi's government is now pushing the Coal India sale to take advantage of strong demand from investors, who view Asia's third largest economy as one of the brightest prospect among major global emerging markets, those involved in the process say.
�
On Monday, India's benchmark Sensex index again touched record levels, hitting 28,206 in afternoon trading. The Sensex has risen by 33 per cent this year, on economic optimism following Mr Modi's overwhelming victory in May's national elections.
�
"The investment environment here has improved such a lot, and so the probability of success for this [Coal India] is now very high," says Nirmal Jain, founder and chairman of India Infoline, a Mumbai-based brokerage.
�
The government wants to move quickly, to ensure its fiscal deficit targets are not only met, but exceeded. It could happen before Christmas, or if not then in January.
�
Coal India's sale is being led by a consortium of banks, including Goldman Sachs, Credit Suisse, Bank of America Merrill Lynch and Deutsche Bank. The banks involved declined to comment.
�
The urgency behind the sale comes as Mr Modi races to meet a self-imposed target to raise around $10bn from the sale of minority stakes in state-backed businesses.
�
That goal in turn is a crucial component of his plans to cut India's fiscal deficit to 4.1 per cent of gross domestic product by March 2015.
�
The sale is being accelerated despite a number of potential problems facing Coal India, the world's largest miner by output, including the fact that the position of chairman, the organisation's most senior executive, is currently vacant.
�
Regulatory issues affecting India's coal sector alongside trenchant objections from powerful trade unions present further issues, with labour leaders promising to being strike action in protest at the sale later this month.
�
Similar obstacles have repeatedly derailed attempts to sell stakes in Indian public sector companies, including an earlier attempt by the country's previous government to off-load a stake in Coal India, which ran into the ground last year.
�
However those involved in the current sale say that a combination of government determination to meet its fiscal targets and heightened investor enthusiasm for India means such obstacles are no longer "deal killers".
�
A senior figure familiar with the sale process, who asked not to be named, said:
�
The optimism around the country is such that I think this deal gets done, even with these problems. People want to own India at the moment. It is the best emerging market story out there.
Source: fast FT
