The Indian government stands accused of hurting the interests of a minority shareholder. How serious are TCI’s allegations against Coal India and the government?
In October 2010, The Children’s Investment Fund (TCI), a UK-based hedge fund, bought a 1.01% equity stake in Coal India in its initial public offering. In doing so, TCI became the second-largest shareholder in the company, which until then had been entirely owned by the government.
Coal India, which has a current market capitalization of US$41 billion and is one of the world’s largest coal-producing companies, had offered 10% of its equity to the public in the IPO. Investors remained optimistic about the company despite a long list of 70 risk factors – some of which could potentially impact the interests of minority shareholders – detailed in the 510-page prospectus.
Full disclosure
Risk factor number 17 plainly said: “We sell our coal at prices lower than the prices otherwise in the Indian and international coal markets.” Explaining this, the prospectus stated that Coal India “generally consult with the government of India in determining the price of our coal”.
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