The maharatna company hides information from investors and regulators, as per a report released by Greenpeace
Geetanjali Minhas | September 24, 2013
World’s largest coal producing company Coal India Limited is misleading investors despite operating on a shortfall of 16percent coal reserves. As per the report “Coal India: Running on Empty?” released by Greenpeace India yesterday, the company has failed to disclose to the stock exchanges its internal assessment of minus 16% of its extractable coal reserves at the time of its listing in 2010, violating stock exchange rules.
Concealing true level of its extractable reserves as it prepares to sell additional shares to international investors the coal behemoth is violating statutory provisions of SEBI, listing agreement under Securities Contracts Regulations Act, 1956, and SEBI’s April 3, 2006 circular relating to disclosure of material events.
Furthermore, misleading its investors the study points out that as per Coal India’s own website it claims to have extractable coal reserves of 21.7 billion tonnes (under the archaic Indian Standard Procedure system), when as a combined review of its internal documents by Greenpeace and the Institute for Energy Economics and Financial Analysis (IEEFA) showed that as per United Nations Reserve Classification System (UNRCS), the company has only 18.2 billion tonnes of extractable under the internationally recognized UNFC system. Government of India had taken a decision in 2001 to switch to the UNFC system. “At targeted production rates, these reserves could be exhausted in 17 years” the report says.
The organization has filed a complaint against CIL with SEBI for concealing material evidence on the scale of their coal reserves in contravention with listing agreement under the Indian Securities Contracts Regulations Act, 1956.
Commenting on the findings, Ashish Fernandes of Greenpeace said: “Coal India is trying to deceive its present and future shareholders by hiding the fact that its extractable reserves are almost a fifth less than it claims. Coal India has a legal duty to tell the truth and they are failing to do that.”
Supreme Court Advocate Shaunak Kashyap said, “It is a matter of grave concern that a government controlled company has failed to notify the exchanges of this reduction in their reserves, something that has serious implications for both investors and the country at large.”
Despite unions threatening to strike if the sale goes ahead and with the company share price dropping in recent weeks, the company is pushing its new share offer on the international market with its tie up with Bank of America, Deutsche Bank, Goldman Sachs and Credit Suisse.
“The new data about Coal India’s reserves also casts doubt on the government’s ability to sustain its planned investment in coal-fired power plants. Coal India currently supplies 80% of the country’s coal and India has plans to add over 100,000 MW of new coal by 2017, even though the company is struggling to supply existing power plants. As a result, spiraling coal imports have played a role in India’s ballooning Current Account Deficit and led to higher power tariffs” the report says.
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