$1 billion capex lined up for FY12

Diwali came a day earlier for IPO investors of Coal India with the stock closing nearly 40 per cent high than the issue price of Rs 245 at the end of debut trade on Thursday. Partha S Bhattacharyya, chairman and managing director of Coal India, shares his thoughts with Kumar Shankar Roy in an exclusive interview. Excerpts:

n A dream listing for Coal India. How are you feeling?
It just feels great. This is a reward for the company and its employees, who have stood up for the values that Coal India stands for. I am happy that investors, especially the retail segment, have understood the value of the company. The listing performance shows that the trust placed in us has been rewarded. I always believed that the response from the markets would be overwhelming.

n Coal India has entered the top five club of the most valued listed companies on its very 1st day...
It’s a good feeling but I am not getting carried away by the euphoria. Valuations can change and stock prices can change. Three, four or five — they are after all just numbers. But the Rs 100 gain that has been delivered into the hands of retail investor has made us proud. But If I may say so, I would like to urge the retail investors to hold on to the gains. I strongly believe that the stock price will go higher.

n People have built in a lot of expectations. What lies ahead in terms of investments?
There are two parts to the investments that we will do. We have earmarked $1 billion as capital expenditure for the next financial year beginning in April 2011.
This will be gone into many things but washeries is a big focus area for us. We also have strong annual accruals of about $2 billion. This will be used in planned capex as well as paying dividends.

n How will you use your huge cash balance?
It stands at around $8 billion. We plan to look for acquisitions, mostly overseas as well as coal mining opportunities. We will look at equity in existing mines, pure off-take deals and joint ventures to develop new mines.
All the investments that we do are governed by an internal rate of return (IRR) of about 12 per cent for rupee-denominated investments. If the amount is invested overseas, the IRR has to be in line with these norms.

n What are the key challenges in front of you?
Going forward, we have to take things very seriously. Investor expectations will have to be met. We will have to focus on projects and make sure than bottlenecks do not hamper our production targets.
We are targeting to add 20 new washeries and it is our responsibility to make sure that the execution of the plan does not get delayed.
We will try our best to meet the expectations of earnings before interest, taxes, depreciation and amortization (Ebitda) and bottom line that domestic as well as foreign investors have from the company.

kumarsroy@mydigitalfc.com