INSUBCONTINENT EXCLUSIVE:
Kolkata: State-run miner Coal India Limited (CIL) plans to convert preference shares of its loss-making subsidiary Bharat Coking Coal
Limited (BCCL) into equity shares to prevent it from heading to the bankruptcy tribunal because of default.
CIL had given loans of ₹2,540
crore to its subsidiary for working capital and investment requirement to keep it afloat
However, when BCCL could not repay, CIL in 2013 converted the dues into 5% cumulative, non-convertible and redeemable preference shares of
face value ₹1,000 each.
The shares were to be redeemed by CIL on April 1this year.
The subsidiary is also required to pay interest of
about ₹880 crore.
“Although BCCL is no more a loss-making company, accumulated losses in excess of ₹2,100 crore have impacted its
ability to pay the amount,” said a senior CIL executive, who did not wish to be identified
“If allowed to default, BCCL will have to be referred to the NCLT (National Company Law Tribunal) according to norms
In an effort to save the company from getting referred to the tribunal, CIL is looking at the possibility of converting the preference
shares to equity shares.”
The CIL board will consider the matter this week.
“If the board accepts the proposal, BCCL will not have to
make the payment since conversion of preference shares to equity shares would be on the books of BCCL while Coal India will forgo the amount
However, the interest component of ₹880 crore needs to be paid as and when the subsidiary is capable,” said the executive.
For 2018-19,
BCCL reported a total income of ₹423.62 crore against a loss of ₹1,297.42 in the previous year
It has so far not made any provision for payment of the interest component.
BCCL incurred losses as many of its underground mines had low
productivity and it also faced pilferage and diversion of coal to the black market
In recent years, e-auctions have helped it make money, but it has faced challenges of higher salaries, law and order issues and unseasonal
rain that hit its output.
Last year, BCCL contributed about 5% to CIL’s total coal production and sales
This year, till February, it accounted for about 4.7% of CIL’s production and nearly 5% of its total sales.