Policy of excessive dividend payout is taking a toll on Coal India’s financial health.
Its current net worth has plunged by almost half from Rs 48,461 crore seen in the financial year 2012-13.
In the last fiscal itself, the networth of world’s largest coal miner has depreciated by close to Rs 10,000 crore to Rs 24,507 crore. It was Rs 34,815 crore in the preceding fiscal.
What’s more shocking is the gradual erosion of retained profit turning negative at Rs 3,618 crore this March-end compared with a positive balance of Rs 11,455 crore that was on its books at the beginning of fiscal 2016.
The fall in retained earnings is the single biggest contributor to the erosion of Coal India’s networth, an analysis of the balance-sheet for fiscal 2017, done by DNA Money has revealed.
“When a company has a high dividend payout and buyback policy it’s obvious that networth would go down,” an analyst with a leading brokerage house said.
With several capital investments stuck and acquisition of foreign mines turning increasingly difficult, Coal India, majorly controlled by the government, doesn’t find much use of its cash, which is being distributed to shareholders.
An analysis of Coal India’s figures over two year period brings out the contrast.
It started fiscal 2016 with retained profits of Rs 11,456 crore carried forward from the previous fiscal, to which fiscal 2016’s income of Rs 14,561 crore was added.
After paying Rs 20,830 crore as dividend and related tax, deducting Rs 8 crore for some adjustment and then transferring Rs 1,628 crore to general reserve, Coal India had just 3,551 crore as closing balance carried forward to next year.
Then, in FY17, only Rs 9,348 crore was added as income, from which Rs 15,000 crore was paid out including tax. Paying Rs 903 crore as buyback tax left a negative balance of Rs 3,618 crore for the current financial year.
During FY17, Coal India paid interim dividends twice in March, first at Rs 18.75 for every Rs 10 face value share followed by another Rs 1.15 a share.
Most of the payout went to the government, which controls about 79% of the equity capital.
This fiscal could see further erosion in its net worth if first quarter performance is any indication of things to come in the rest of the year. Its first quarter profit has dropped 23% to Rs 2,351 crore from Rs 3,065 crore year ago with revenue rising marginally by 4.3% to Rs 20,568 crore.
With Ebitda margin down 480 basis points to 18.4%, operating profit declined 17.8%.
...& ANALYSIS
- CIL’s current net worth almost halved from Rs 48,461 crore seen in 2012-13
- There has been a gradual erosion of retained profit turning negative
- When a company has a high dividend payout and buyback policy it’s obvious that networth would go down
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The fall in retained earnings is the single biggest contributor to the erosion of Coal India’s networth, an analysis of the balance-sheet for fiscal 2017, done by DNA Money has revealed.
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