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With Rs 2,000 crore buyback at units, CIL fattens coffers for govt

Mahanadi Coalfileds and Northern Coalfields buy back 23.82% and 22.62% of equity capital from CIL; move precursor to CIL's buyback from govt

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 In what is being perceived as a precursor to a move to bloat Coal India's cash chest for the government to take later, two of Coal India's mining subsidiaries have decided to buy back their shares from their parent to close of 25% of their respective equity capital.

CIL is set to get about Rs 1,977 crore by giving back shares to the extent of 23.82% and 22.62% of equity capital of two of its wholly owned subsidiaries, Mahanadi Coalfields and Northern Coalfields respectively, helping the coal behemoth get back Rs 1,028 crore and Rs 948 crore from these two cash-rich subsidiaries, the near-monopoly coal miner said on Sunday. The proposals of buyback were cleared by the boards of these two subsidiaries on Saturday and similar proposals are likely to get taken up soon by some of the other subsidiaries like Central Coalfields, South Eastern Coalfields and Western Coalfields, sources said.

The shares of Mahanadi Coalfields have been valued at Rs 23,171.89 a piece having face value of Rs 1,000 a share while Northern Coalfields would buy back its shares for Rs 23,610.04 a share. In comparison, Coal India shares, whose face value is Rs 10, closed at Rs 307.15. Why is Coal India's subsidiaries are buying back shares from Coal India while other PSUs like NMDC and MOIL have announced their plans to buy back their own shares?

"Coal India is taking back the money from its arms so that it can pay the government when it would later buy back its shares from the government," an analyst with Prabhudas Lilladher told dna. Coal India is really a holding company for nine subsidiaries including one consultancy arm, Central Mine Planning and Design Institute and one overseas arm, Coal India Africana Limitada.

Except the consultancy subsidiaries, all others undertake the actual mining operations having its own independent boards while Coal India's standalone income consists mostly of dividend income from these subsidiaries.
Coal India coupled with these subsidiaries have a whooping cash stash of not less than Rs 60,000 crores. Mahanadi Coalfields and Northern Coalfields, the two subsidiaries that would be paying money to Coal India, had Rs 4291 crores and Rs 5699 crores of reserve and surplus in their respective books as on March 2015.

 m_sumit@dnaindia.net

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