CIL, as of March 2020, has neither any long-term nor any short-term borrowing. It has no deferred tax liabilities and its cash reserves stood at Rs 30,000 crore as of March 2020.
PSU miner Coal India (CIL) is likely to decide on the buyback of shares in its board meeting on November 11, in view of its stocks under-performing for quite sometime. A company official said buyback will prevent the declining value of stocks, leading to improvement in earning per share. “If the company decides the buyback of shares on a higher value than the current market price, it will signal the company’s confidence in its business, thereby boosting investors sentiment.”
CIL shares recently registered their 52-week-low at Rs 109.50 per share, whereas the 52-week-high has been at Rs 215.85 per share. The company’s stock closed at Rs 121.75 on Monday.
Some feel that buyback is no more tax efficient and hence the company should skip the government’s proposal of buying back this fiscal given its cash strap situation. Company sources said the constraint in cash flow has been very temporary, which started improving with coal demand from the power sector increasing and e-auction sales moving up.
CIL, as of March 2020, has neither any long-term nor any short-term borrowing. It has no deferred tax liabilities and its cash reserves stood at Rs 30,000 crore as of March 2020.
Buyback will help increase the overall rate of return from owning shares in the company, the official said. The company undertook buyback in FY18 and FY19 and paid out dividends as well.
The Centre got Rs 3,400 crore from the two buybacks. Sources in the company said the buyback price was Rs 235 per share in FY19 but this time it would be much lower. The profits from the buyback would be treated as a long term capital gain, taxing it at 10%.
Tax on the profits of a buyback is more economical than tax on dividend payout, though the company doesn’t seem to be weighing between tax on dividend payout and tax on profits if any from the buyback of shares.
CIL payed 120% interim dividend in March 2020 with total outgo at Rs 7,395 crore. The company has already informed the exchanges about taking a decision on its dividend in its board meeting. It has announced November 20 as the date for dividend payout, if there is any.
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