Coal India Will Pay Record $3 Billion Interim Dividend

Coal India Ltd., the world’s largest producer, will pay a record dividend of 183 billion rupees ($3 billion) to help the government cut its budget deficit.

The company, owned 90 percent by the government, will make an interim payment of 29 rupees a share for the year ending March 31, according to a stock exchange statement today. The dividend will be paid starting Jan. 25, it said.

The finance ministry expects to raise 150 billion rupees selling shares in state-owned companies for the year ending March 31, less than half its targeted amount. That’s adding pressure to extract special dividends as the government pushes to prevent a sovereign credit-rating downgrade to so-called junk.

“The special dividend gives some relief to investors at a time when the company is facing challenges to its earnings growth,” said Giriraj Daga, a Mumbai analyst at Nirmal Bang Equities Pvt., who has a sell recommendation on Coal India. “For a longer term improvement in the stock, investors will be looking at consistent higher dividend payouts.”

Coal India shares fell 0.5 percent to 288.90 rupees in Mumbai. The dividend was announced after trading ended. The benchmark S&P BSE Sensex also fell 0.5 percent.

Until now, the highest dividend Coal India had paid since listing in 2010 was 88.4 billion rupees for the year ended March last year, according to data compiled by Bloomberg.

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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