Now that The Children?s Investment Fund Management (TCI) has filed its suit against Coal India Limited, and asked for a compensation of R1,500 crore, it remains to be seen if other minority investors join its suit?based on TCI?s compensation claim, the other 9% shareholders (90% of CIL is government-owned) can claim R13,500 crore. A R15,000 crore claim has to be seen in the context of CIL?s FY12 pre-tax profits of R21,254 crore.
While the case will take years, if not decades, to wind down the Kolkata High Court and finally the Supreme Court, what?s important is whether this will induce other investors in other PSUs to follow suit. Indeed, in some of these other PSUs, the impact of bad government policy is equally bad. In the CIL case, according to TCI, the government forcing the coal major to sell less coal through e-auctions where prices are higher, and more at lower prices, has caused the company a huge loss. But this is precisely what happens in the case of oil PSUs like ONGC all the time. In FY12, according to ONGC, it had to sell crude at a discount of R44,466 crore to oil marketing companies like Indian Oil who, in turn, sold petrol and other products at vastly subsidised rates. If ONGC didn?t have to pay this subsidy, its market capitalisation would have gone up by R2,60,000 crore?this is based on a tax rate of 33% and ONGC?s current p/e of 8.8. If, however, the p/e rose, and it would if investors knew ONGC didn?t have to spend R40,000-50,000 crore on annual subsidies, the loss in potential market capitalisation would be even higher. Do the same exercise for Indian Oil and other oil marketing firms, and the losses get dramatically higher. That?s a lot of fodder for several more TCIs.
