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Coal India bets on four ‘mantras'

The hype and the hoopla over the country's largest share sale (and that too by a public sector company) is now over and on Dhanteras day, Coal India helped create wealth for those who chose to trade some of their shareholding in one of the world's largest coal producers with the scrip jumping 30 per cent within hours of CIL's market debut.

The coal major now finds itself at an inflexion point.

From here on as a listed company, the pathways that it takes will have to be somewhat different as it starts sharing its concerns with a wider cross-section of people, becoming answerable to a new class of stakeholders — its equity shareholders — whose thumping vote of confidence has silenced the Doubting Thomases who had written off the issue even before the filing of the offer documents with the market regulator.

CIL Chairman P. S. Bhattacharyya, who played a major role in marking the company's place in history is, however, unwilling to rest on his laurels. With only a few months left before he lays down office early next year, the 59-year-old is actually a man in a hurry.

“This is no time to rest on your oars,” he said in an interview to The Hindu. As the helmsman, he has steered the company to its present position but feels that much more needs to be done to sustain the present performance, as the largest coal-producer now faces vigil, 24x7, from its gamut of shareholders across the globe.

“Sustainability, improved coal quality, right pricing and better returns” should be the four mantras for CIL, he said.

Inherent strengths

Having piloted the company over the last four years, Mr. Bhattacharyya is confident that now CIL has acquired the inherent strengths that will help it face the rigours of being a company that withstands the ‘bulls and the bears' of the capital market and the surveillance of the watchdog, while remaining within the government control.

To a question as to how exactly did CIL silence its critics within its parent ministry and elsewhere, Mr. Bhattacharyya quipped: “CIL reached this position in spite of the Prophets of Doom.”

Elaborating, he said the company had grown to its present stature because of some people, especially its employees, but also despite some people. The runaway-success proved the company's worth and should now silence the doubters, he felt.

He said that CIL's competitive strengths were many. It is one of the world's largest coal producers and one of the largest reserve-holders of coal and is well-placed to capitalise on the high demand for coal with a track record of growth and cost-efficient operations. Although it earlier carried the tag of a perennially sick public sector unit, it has morphed itself into a company with strong fundamentals with a solid record of financial performance.

In India, the coal sector is dominated by the public sector undertakings (PSUs) under the Central and State governments with CIL alone accounting for 85 per cent of the output.

Business strategy

It already has in place a business strategy to remain ahead. This includes a thrust on production, (which faces many obstacles) and capitalising on the significant demand-supply gap. It is trying to improve realisations through increased sales of beneficiated higher quality coal and the use of e-auction pricing mechanisms. Enhancing profitability and maintaining competitiveness by improving operating and cost efficiencies are also part of the gameplan to stay ahead. Mr. Bhattacharyya said the IPO performance was “largely because of what we have done in the past and to a lesser extent what we are expected to do in the future. But the future has now acquired a new dimension and it is in this context that our plans like the one on setting up washeries take centre-stage. These are expected to come up by 2014.”

The performance of the initial public offering (IPO) has to be related to the implementation of the strategy adopted by CIL over the last ten years. Conscious that the company faces some threats, the CIL chairman said that it was important to put management actions in place so that the scrip generated fair return to the investors even after it found its level after the euphoric start, which also proved that the market had appetite for good stocks.

Thus, alongside continuing with its strategy of putting thrust on production growth and offtake which, coupled with the manpower attrition, led to improved margins, the next steps aim at further improvement of margins through implementation of the coal washery programme which will improve prices since quality is a disadvantage that Indian coal faces and more importantly, to substantially focus on environment and social issues.

This would mean intensifying afforestation activities, surveillance through satellite imaging and involving the land-givers to formulate customised rehabilitation and resettlement (R&R) programmes, over and above the one announced officially. Mr. Bhattacharyya mooted a concept of involving mining companies in augmenting farmers' incomes on un-mined patches of acquired land, by helping them get into cash crop cultivation and marketing.

The CIL chairman regretted that the employees, who brought the company to its present state, could not take home some early gains as many of them had shunned the IPO. The Coal Minister was more forthcoming in this respect on the listing day, placing the blame squarely on trade union politics.


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