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Two weeks after it threatened to sue the board of directors of Coal India (CIL), London-based hedge fund, The Children's Investment Fund (TCI), said it was unhappy with the company's response and had written to coal secretary Alok Perti to change the top management of CIL, saying the company "lacked necessary leadership to develop operationally".
"We are not going to keep sitting and wait for things to happen. It is not our nature to keep quiet. We are moving to the next stage of our action," Oscar Veldhuijzen, partner, TCI, told Business Standard in a telephonic interview. "You will see the official response on Monday," he said. Business Standard has reviewed a copy of the letter sent to the coal secretary. TCI is the second largest shareholder in CIL, with 1.01 per cent stake. The government of India owns 90 per cent.
Coal India chief financial officer A K Sinha did not take phone calls. Other officials were not available for comment.
In his letter addressed to the top management and board members of CIL on March 12, Veldhuijzen had alleged breach of fiduciary duties by the directors and threatened legal action "if no clear commitments are made public in the immediate future to provide parity of coal prices to import prices and rectifying the other breaches of fiduciary duties which we have outlined."
In the letter, TCI alleged that Coal India reversed a decision to raise coal prices on instructions from the government. TCI had obtained a letter written by the coal secretary to N C Jha, the then chairman of CIL, through the Right to Information (RTI) Act.
In a separate letter addressed to the government a few days after writing to the board, TCI said Coal India lacked the necessary leadership to develop operationally after the retirement of CMD Partha Bhattacharya.
"It is time for the board to hold the management accountable, or for the board and management to be swiftly changed. As the largest shareholder in CI, you should, like ourselves be striving to see the company performs to world-class standards. This is clearly not happening and we urge you to increase the pressure on the board and management to deliver results on operational performance," it said.
"The Indian government privatised Coal India in order to improve performance, accountability and transparency. It was a sensible plan. However, due to the critical issues outlined in the letter attached, Coal India is failing its country, its shareholders and consequently, the people of India. Coal India holds a crucial key to India's development but is failing. We urge you to immediately address the points we raise in a transparent manner," the letter added.
Veldhuijzen further said the board members had a feeling they had not done anything wrong. "We are disappointed. While there has been no official response, individual board members we spoke to after writing the letter are in a state of denial. But, we have documents to prove otherwise," he said.
Veldhuijzen also said the latest leaked CAG report only substantiated the points raised by the fund's letter to the CIL board last week. "The two issues are closely related. The report shows it is not only Coal India which is selling coal cheaply and looting the people of India. There are also inefficiencies in government allocation and coal is being given away to people close to the government and many of the companies which have got approvals are related to each other."
Requesting the people of India to support TCI's campaign, Veldhuijzen said, "The government is ruining India's capital market. Its policies are not only destroying the appetite of international investors and domestic investors in Coal India, they are destroying interest in the Indian capital market itself."