Coal India Eyes Minority Stakes in Overseas Coking Coal Mines

Coal India is looking for minority stakes in operational coking coal mines in Russia, Canada, and Australia.

The company has renewed its effort to acquire foreign coking coal assets as the fuel is getting unpopular in many countries, which can help the Indian company get a good price. Large banks in these countries have backed out from financing coal mines and thermal power plants. Many bankers have stayed away from such deals. Coal India wants to grab this opportunity by using internal accruals to finance such acquisitions.

Based on the company's experience it may gradually increase stakes, following which it may buy them out, and then look for new blocks in these countries, a senior Coal India executive shared.

A delegation of senior executives including Coal India Chairman A K Jha met Russian Deputy Prime Minister Yury Trutnev in Russia last week. This will be followed by a team of Coal India executives examining proposals of acquisition, the executive said.

For Australia, Coal India has already floated a tender for appointing merchant bankers to scout for assets and advice the company in acquiring stakes. After merchant bankers are appointed the company will finalize the assets, in which Coal India may buy a minority stake, to begin with. Many bankers such as Goldman Sachs and Merill Lynch stayed away from the tender as the asset is considered dirty but ANZ, BNP Paribas, JP Morgan, and some others have shown interest.

Coal India's past experience in acquiring foreign assets is not a happy one. It had acquired an exploratory block in Mozambique in August 2009. It gave away the block as preliminary exploration showed that the block did not have good quality reserves.