Lanco Infratech, which owns Australia-based Griffin Coal, will “seriously” look for equity dilution in the subsidiary after some factors such as appreciating Australian dollar and falling coal prices are settled, sources close to the development said.

The sources indicated that though the problem is not specific to the company, these issues may not be encouraging in terms of valuation.

“Australian dollar is historically and futuristically weaker than US dollar. But currently it is (slightly) higher than US dollar or equal. Strong AUD is not good for the export economies. All Griffin Coal are in AUD, whereas the realisation will be in US dollar,” the sources told PTI.

“The coal prices are down by almost 30 per cent when compared to three years ago. It used to be $120 but now it is hovering around $90. These are not specific to the company. It is larger picture of the current situation.

Current situation may undermine the true value of the project,” the sources added.

The total cost of the project is AUD 1 billion with 70 per cent debt and 30 per equity, the official said.

Tapan Trivedi, a senior analyst from JRG Securities is of the opinion that the AUD is expected to get weaker against US dollar in the near future.

“On May 7, the Australian Central bank unexpectedly cut its key interest rate by 25b bps to 2.75 per cent to kick start the loosening economy and bolster long-term investment.”

“However this has further weighed the trend in AUD which recently slipped to 1.01 levels. We feel the AUD might further fall down below the critical 1.000 mark in medium term,” Trivedi said.

Lanco had earlier said it had appointed an Australian Bank as consultant for the total project finance.

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