By Fakir Balaji
Thiruvananthapuram, Jan 7 (IANS) The federal government will divest 10 percent equity in the state-run Coal India next fiscal, hoping to generate $8-10 billion, going by the valuation of a comparable Chinese company, a top official said Thursday.

“The divestment of government equity up to 10 percent will take place later this year — that is during fiscal 2010-11 in the capital market through the book-building process,” Coal India chairman Partha S. Bhattacharyya told IANS here.

It will be the first time the government will offload stake in the Kolkata-based firm, named as a navratna or a jewel among state-run firms, that accounts for 85 percent of the country’s total coal production of 493 million tonnes.

“The divestment process will be in compliance with the regulatory body’s guidelines. The valuation and proportionate allotments to institutional and private investors would be taken up once the cabinet clears the proposal,” Bhattacharyya said.

“As we will be going public for the first time, we are yet to assess the value of the equity though the company’s fundamentals have been strong during the past couple of years,” he said on the margins of the 97th Indian Science Congress.

The firm will also decide the number of shares to be allotted to its 425,000 employees on pro-rata basis. With one of the largest number of employees in India’s organised sector, eligibility for share allotment will be worked out proportionately.

Asked about the amount the government will raise by offloading 10 percent of its stake, Bhattacharyya said it would depend on the book price, market conditions and the company’s business prospects.

“All I can say is a Shanghai-based listed Chinese coal mining firm, with which we are on par, has a market capitalisation of $100 billion. With a cash-flow of $1.24 billion and a strong bottomline, we should also command a higher market cap.”

The 35-year-old holding company with eight subsidiaries posted sales turnover of Rs.388 billion (Rs.38,788 crore) last fiscal (2008-09). With the largest captive coal reserves, the profitable company produced about 419 million tonnes per annum last fiscal.

“We intend to invest a part of the funds from the public issue to set up washing units at all our pitheads to sell coal with lesser ash content,” Bhattacharyya said.

Domestic coal prices are about 50 percent lower than in international markets, he said, adding that by selling washed coal, the company will be able to increase the unit price in the ensuing fiscal.