Boards of three subsidiaries of state-run Coal India Limited have slashed valuations of the shares of these companies by at least 75% over the values declared earlier this month. The earlier valuations, according to the merchant banker of the listed monopoly miner, did not reflect the true valuation of either the subsidiaries or the parent.
But even as the valuations have been reduced, the amount of money that Coal India will receive post reduced valuation through proposed share buybacks remains the same at Rs 5,063 crore. In fresh announcements of buyback post revaluation, the number of shares to be bought back has been increased to keep the total sum the same.
Four of Coal India’s eight subsidiaries, including Central Coalfields, had announced share buy-backs last month. As part of the exercise, the boards of these companies had valued their shares.
The earlier valuations included factors that are considered for valuing international companies, resulting in higher valuations, said a Coal India executive, who did not wish to be identified.
Later it was realised that some of these factors may not be relevant for Indian coal companies, he said.
A fresh valuation exercise was thus conducted, leaving out factors that were irrelevant for India. This resulted in reduced valuations for three subsidiaries –Northern Coalfields, Mahanadi Coalfields and South Eastern Coalfields.
“Since these subsidiaries are not listed, there was no market driven share valuation available for these companies and the merchant banker had to resort to theoretical norms to ascertain their value,” the executive said.
Initially, shares of Northern Coalfields were valued at Rs 1.629 lakh per share of face value Rs 1,000 each. The valuation has been reduced 81% to Rs 30,260 per share.
Shares of Mahanadi Coalfields were initially valued at Rs 2.922 lakh per share of face value of Rs 1,000. This has been revised to Rs 35,796 per share.
Similarly, shares of South Eastern Coalfields were earlier valued at Rs 79,777 per share, but have been subsequently revalued at Rs 19,599 per share.
While shares of the three subsidiaries are now valued between Rs 19,599 and Rs 30,260 per share, shares of its parent, Coal India, were offered at Rs 225-245 per share in 2011. The stock opened at Rs 288 on the Bombay Stock Exchange and reached an all-time high of Rs 440 in 2015. On Tuesday it was quoting at Rs 295 at the Bombay Stock Exchange.
“While Coal India’s equity base is almost 620 crore, with each share having a face value of Rs 10, the shares of subsidiaries hold a face value of Rs 1,000 each, and the total number of shares for each of these subsidiaries is a few lakh only, resulting in many times higher valuation for each share than the parent’s,” the executive said. Shea Weber Womens JerseyShare This