India is seeking a record dividend of 150 billion rupees ($2.4 billion) from Coal India Ltd. (COAL), the world’s largest producer, to raise funds to help meet a budget-deficit target, said two Finance Ministry officials with direct knowledge of the matter.
The government also intends to tap another state-owned company, NMDC Ltd. (NMDC), for 25 billion rupees via a special dividend or share buyback, and sell half of its 21 percent stake in Axis Bank Ltd. (AXSB) for about 60 billion rupees, the officials said. They asked not to be identified as the deliberations are private.
The officials said the Finance Ministry expects to raise only 150 billion rupees of the targeted 400 billion rupees from the sale of shares in state-owned companies for the year ending March 2014. That’s adding pressure to extract special dividends as the government pushes to prevent a sovereign credit-rating downgrade to so-called junk status.
Finance Ministry spokesman D.S. Malik declined to comment on the plan to raise funds.
“A higher dividend payout is obviously a reason to celebrate for investors,” said Deven Choksey, managing director at Mumbai-based KR Choksey Shares & Securities Pvt., referring to Coal India. “But the company should be left with enough cash to bolster its operations and improve its profitability.”
Coal India shares pared losses of as much as 1.3 percent, closing down 0.5 percent in Mumbai. Axis Bank slid as much as 1.5 percent and ended 0.4 percent lower. NMDC fell 1.1 percent. The benchmark S&P BSE Sensex index declined 0.3 percent.
The government plans to raise 540 billion rupees in total share sales this fiscal year, including 140 billion rupees from legacy holdings in private businesses such as Axis Bank. The administration has raised 13.3 billion rupees with three months of the fiscal year to go.
Coal India’s highest dividend since listing on the stock exchange in 2010 was the 88.4 billion rupees paid in the year ending March 2013, according to data compiled by Bloomberg. NMDC, India’s largest iron ore miner, paid 27.8 billion rupees for that period.
Prime Minister Manmohan Singh set a goal to pare the budget deficit to a six-year low of 4.8 percent of gross domestic product this fiscal year. The shortfall in the eight months through November reached 94 percent of the full-year target of 5.4 trillion rupees.
India’s credit rating may be cut to junk in 2014 unless the general election due by May leads to a government capable of reviving economic growth, Standard & Poor’s said in November.
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