India Plans to Raise $3.7 Billion Selling Coal India Shares

India plans to raise 200 billion rupees ($3.7 billion) selling part of its stake in Coal India Ltd., the world’s biggest producer of the fuel, and narrow the widest budget deficit among major emerging economies.

The government, which owns 90 percent in the monopoly coal miner, plans to sell a 5 percent stake to the public and a similar holding to the company, according to a finance ministry’s draft proposal obtained by Bloomberg News.

Prime Minister Manmohan Singh’s administration sold stakes in companies including NTPC Ltd., NMDC Ltd. and Oil India Ltd. for about 240 billion rupees in the year ended March 31 to shrink the deficit, pay for subsidies and invest in public works. Coal India shares had their biggest gain in almost a year adding 57 billion rupees to their market value.

“The success of the share sale will depend a lot on the mood of the market,” said Rahul Jain, an analyst with CIMB Securities India Pvt. in Mumbai, who has an underperform rating for the stock. “The timing of the share sale should also be right. It should not be clubbed with three or four other share sales in a short period of time.”

The stock gained 3 percent to 310.75 rupees in Mumbai, the most since April 19. The shares have declined 12 percent this year, compared with a 4.7 percent drop in the benchmark BSE S&P Sensex index.

Labor Unions

The Disinvestment department has asked the coal ministry to take the company’s worker unions into confidence and gather support for the share sale, according to the document. The unions were assured at the time of the company’s initial public offering in 2010 by the then finance minister Pranab Mukherjee there would be no further disinvestment.

“We anticipate some labor issues and we will do our best to take them into confidence,” Coal Secretary S.K. Srivastava said in an interview.

The government plans to raise 400 billion rupees this fiscal year selling stakes in National Aluminium Co., Rashtriya Ispat Nigam Ltd., Indian Oil Corp., Power Grid Corp. of India, Bharat Heavy Electricals Ltd. and Coal India.

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