The government aims to generate approximately Rs 4,160 crore from this OFS
02-Jun-2023 •Udhayaprakash
Coal India , the world's largest coal-producing company, has launched an offer for sale (OFS) to sell 3 per cent of its outstanding shares, aiming to raise approximately Rs 4,160 crore.
As the OFS involves a stake sale by the promoter (here, the government), the company itself will not receive any proceeds.
The OFS has been priced at a floor price of Rs 225 per share, representing a 2.4 per cent decrease from the closing price on June 1, 2023. Consequently, Coal India's share price experienced a decline of 4.4 per cent on that day. The OFS will be conducted over two days, from June 1 to June 2, 2023, with retail investors being allowed to participate on the second day.
Fuelling profits
Coal India is the world's largest coal producer with 318 mines. It accounts for approximately 80 per cent of India's total coal production and serves as a vital supplier to the power industry.
Benefiting from this near-monopoly position, Coal India has been a highly profitable enterprise. Furthermore, the company has utilised its substantial cash flows to provide significant dividends to its shareholders. With a dividend yield of 10.5 per cent, it is one of the leading dividend-paying companies in the country. Over the past decade, Coal India has distributed a cumulative dividend of Rs 206 per share, which accounts for 76 per cent of its total earnings per share (EPS) since FY13.
| Financials | Mar-2023 | Mar-2022 | Mar-2021 | Mar-2020 | 3Y CAGR (%) |
|---|---|---|---|---|---|
| Revenue (₹ cr) | 138,252 | 109,715 | 90,026 | 96,080 | 12.9 |
| Operating profit (₹ cr) | 32,143 | 20,241 | 14,666 | 18,129 | 21.0 |
| Operating margin (%) | 23.2 | 18.4 | 16.3 | 18.9 | |
| Net profit (₹ cr) | 28,165 | 17,358 | 12,700 | 16,714 | 19.0 |
| Cash flow from operations (₹ cr) | 35,686 | 41,088 | 10,592 | 4,977 | 92.8 |
| Capex (₹ cr) | 14,103 | 11,996 | 10,852 | 5,589 | 36.1 |
| Free cash flow (₹ cr) | 21,584 | 29,092 | -260 | -612 | - |
Recent developments
In May 2023, the company announced its intention to invest approximately Rs 91,000 crore in diversification projects until FY26. Of this amount, Rs 36,000 crore will be allocated to coal gasification projects, Rs 46,000 crore to mining developers cum operators, and the remaining funds will be allocated to other projects.
In addition to developing new mines, Coal India has ventured into the renewable energy sector to reduce its overall carbon footprint. It aims to establish a 3GW capacity of solar power projects by FY24. The company also plans to enter the aluminium value chain as part of its diversification strategy.
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