By Saurabh Chaturvedi, ET
NEW DELHI -- Coal India Ltd., which has cash reserves of about 430 billion rupees ($9.6 billion), plans to invest up to 10 billion rupees ($223.3 million) in mutual funds this year as part of a new strategy to get better returns on its surplus cash, the company's finance director said.
The world's largest coal producer plans to initially invest in liquid debt mutual funds on a "trial basis," later graduating to fixed maturity plans, Asok Kumar Sinha siad in a recent interview.
"We are testing the waters and have already invested 2 billion rupees from the earmarked amount [since January]," Mr. Sinha said by phone from Kolkata, where the company is headquartered.
"Returns from mutual funds are better and tax-free."
Coal India, which listed on India's stock exchanges on Nov. 4 2010, will invest the 10 billion rupees in four mutual funds--UTI Asset Management, SBI Mutual Fund, LIC Mutual Fund and Canara Robeco, Mr. Sinha said.
The latest preference for mutual funds is a break from the past for the state-run company, which has traditionally invested most of its surplus cash in fixed deposits with government-owned banks.
In 2007, India's federal government allowed state-run companies to park up to 30% of their investible cash surplus in mutual funds.
Investible cash surplus is the amount left after provisioning for capital expenditure.
Kalpana Jain, senior director at Deloitte Touche Tohmatsu India, said investment in mutual funds by Coal India is a sign of the company's "progressive attitude." It has so far not been able to utilise the huge cash reserves to buy stakes in coal mines overseas and bridge India's coal demand supply gap, which is estimated to be 142 million tons for this fiscal year which started April 1.
"In my view, Coal India is trying to harness the true potential of the cash reserves it is sitting on [by making such investments]," Ms. Jain said.
Mr. Sinha said the investment by Coal India in mutual funds is now standalone as the company's board is yet to approve a similar plan for its units.
Coal India has eight units, including Bharat Coking Coal Ltd. and Eastern Coalfields Ltd.
"We started with a small amount. Going forward, our share of investment in mutual funds should rise further," Mr. Sinha said.
But fixed deposits in state-run banks will continue to be the primary route for Coal India to invest its surplus cash.
"We are not allowed to invest in equities," he said.
The company's board, in consultation with the federal coal ministry, bars investments in equity mutual funds.
(sourced ET)
The world's largest coal producer plans to initially invest in liquid debt mutual funds on a "trial basis," later graduating to fixed maturity plans, Asok Kumar Sinha siad in a recent interview.
"We are testing the waters and have already invested 2 billion rupees from the earmarked amount [since January]," Mr. Sinha said by phone from Kolkata, where the company is headquartered.
"Returns from mutual funds are better and tax-free."
Coal India, which listed on India's stock exchanges on Nov. 4 2010, will invest the 10 billion rupees in four mutual funds--UTI Asset Management, SBI Mutual Fund, LIC Mutual Fund and Canara Robeco, Mr. Sinha said.
The latest preference for mutual funds is a break from the past for the state-run company, which has traditionally invested most of its surplus cash in fixed deposits with government-owned banks.
In 2007, India's federal government allowed state-run companies to park up to 30% of their investible cash surplus in mutual funds.
Investible cash surplus is the amount left after provisioning for capital expenditure.
Kalpana Jain, senior director at Deloitte Touche Tohmatsu India, said investment in mutual funds by Coal India is a sign of the company's "progressive attitude." It has so far not been able to utilise the huge cash reserves to buy stakes in coal mines overseas and bridge India's coal demand supply gap, which is estimated to be 142 million tons for this fiscal year which started April 1.
"In my view, Coal India is trying to harness the true potential of the cash reserves it is sitting on [by making such investments]," Ms. Jain said.
Mr. Sinha said the investment by Coal India in mutual funds is now standalone as the company's board is yet to approve a similar plan for its units.
Coal India has eight units, including Bharat Coking Coal Ltd. and Eastern Coalfields Ltd.
"We started with a small amount. Going forward, our share of investment in mutual funds should rise further," Mr. Sinha said.
But fixed deposits in state-run banks will continue to be the primary route for Coal India to invest its surplus cash.
"We are not allowed to invest in equities," he said.
The company's board, in consultation with the federal coal ministry, bars investments in equity mutual funds.
(sourced ET)
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