The government on Friday successfully offloaded 10% stake in Coal India to raise around Rs 22,400 crore in India’s biggest-ever equity offering. The 631-million-share offer for sale (OFS) saw a total of 675 million bids at an indicative price of Rs 358.5 a share slightly higher than the floor price of Rs 358 set by the government.
Meanwhile, shares of Coal India traded in the secondary market extended their fall to close at Rs 360.85, down over 6% from Wednesday when the government announced its share sale plan.
Investment bankers handling the issue said the Coal India offering saw demand from a host of institutional investors including banks, mutual funds, foreign investors and insurance companies.
According to sources, insurance giant Life Insurance Corporation (LIC) was the biggest investor, with investment of around Rs 8,000 crore . Other state-owned institutions, including General Insurance Corporation (GIC) and State Bank of India (SBI), put in another Rs 1,000 crore worth of applications.
Participation from government-owned institutions was less compared to some of the past disinvestments, however, the Coal India share sale may not have received full subscription without their investments.
Bids worth over Rs 2,000 crore were received from small investors (those investing up to Rs 2 lakh), however, the retail portion was subscribed around 44%. The unsubscribed shares in the retail category will be allotted to non-retail investors, the demand from whom was 1.23 times more than the shares on offer.
|High stakes||Coal India share sale saw more demand than shares on offer|
|in mn||Shares on offer||Bids received||Value of bids* (Rs cr)||Subscription (%)|
|Source: BSE, NSE; *At an indicative price of Rs 360.1 for retail and Rs 358.5 for non-retail; Retail will get additional 5% discount on allotment price|
“The demand came from a broad category of investors. Marquee FII names invested close to $1 billion. Demand from domestic institutions and retail too was fairly strong,” said Sanjeev Jha, head of capital markets – India, Bank of America Merrill Lynch.
“The sale was successful despite the short time given to market the deal. Over 170,000 retail applications were received. It is fairly significant given that retail had only one day to arrange for funds and invest compared to an IPO, where they have a lot more time,” said Sanjay Sharma, managing director, equity capital markets at Deutsche Equities India.
“The demand was good considering the share sale was the largest-ever,” said Jayasankar, senior executive director and head of equity capital markets, Kotak Investment Banking. “The government has shown determination to push ahead with disinvestment. The Coal India success will help the government launch other share sales.”
The government has set an ambitious disinvestment target of over Rs 43,400 crore for the ongoing financial year. Coal India was the second disinvestment this fiscal after Steel Authority India (SAIL) in which the government sold 5% in December 2014 to raise around Rs 1,700 crore.
Disinvestment secretary Aradhana Johri said with just two left the government is giving its best to achieve the disinvestment target. “In the coming months you can expect more issues. We also have made some suggestions to the government to further ease the share sale processes,” she said.
Oil and Natural Gas Corporation (ONGC), Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) are some of the other disinvestment candidates identified by the government for the current fiscal.
State-owned Coal India is the country’s largest coal miner and biggest supplier of coal for the domestic market. The company commands market capitalisation of Rs 2.28 lakh crore and is among the country’s top 10 most valued.
Following the 10% disinvestment, the government’s holding in the company will drop to 70%. The centre had sold 10% stake in Coal India in the biggest-ever initial public offering (IPO) worth more than Rs 15,000 crore in 2010.