A good augury

The initial public offering of Coal India Ltd, which is now open for subscription, is important not only for government finances but also for the stock markets. It is the biggest ever public offering in the country and seeks to raise over Rs 15,000 crore from the market by selling 10 per cent of government stake in the company. There are some questions about the price, but these may not be serious in view of the strength of the company and its future prospects. When the markets are in good shape, with increasing appetite among foreign institutions for quality Indian stocks, there is not much doubt about the success of the mega issue. The issue will also give some more depth to the market, and will impart more stability to the indices.

Coal India is the world’s biggest coal company. It is a behemoth of a monopoly and  enjoys high profits. Coal has an important role in the country’s  power sector and with rising economic growth, its role will be increasingly critical. Coal India is well placed to take advantage of that opportunity. It also has to contend with negatives, like the poor quality of a good part of its coal reserves, inability to realise the best price due to constraints imposed by government policies and infrastructure problems. There are also problems related to the public sector culture. It is not easy to manage a company which has a workforce of over four lakh even after some downsizing. The possibility of greater professionalism in the running of the company and the need for greater accountability following the public issue can help the company to do much better than in the past. It has much national value, which will hopefully be enhanced in the coming years.

The issue is important for the government’s disinvestment programme too. Last year the government had exceeded its disinvestment target by a wide margin and this year also it is set to achieve the target of Rs 40,000 crore. There is still some resistance in many quarters to the idea of disinvestment. But the fact that it is possible in a big company like Coal India may be sign that the idea is facing less resistance than in the past and is even gaining more acceptability. That is a good augury.

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