CIL decides against anchor investors for IPO

State-run Coal India Ltd (CIL) has decided against roping in anchor investors for its forthcoming mega Initial Public Offer (IPO) as the government feels the selection process may not be transparent enough.

“The government has decided to drop the anchor investor idea, as demand will exceed limits and pro-rata allotment is not possible as in other class of investors, including qualified institutional buyers (QIBs),” top sources said.

Adding: “We have to be discretionary in choosing anchor investors. This is something which the government is not comfortable with, as the process of selection of such investors may not be transparent.”

The government might find it difficult to explain why it selected one anchor investor over another, they said.

Consequently, there will be no quota reserved in the QIB segment of CIL’s IPO for anchor investors.

CIL Chairman Partha S Bhattacharyya recently said that even if the anchor investor portion was dropped, it was unlikely to impact the valuation of the company, as interest from investors and demand for CIL shares was very high.

He had said the response from investors was overwhelming in major cities like London, Los Angeles, Sydney and Singapore.

Anchor investors are those who buy shares of the company before launch of the public issue. The concept was approved by Sebi last year. Anchor investors, who cannot be a promoter of the issuer company, can be allocated as much as 30 per cent of the portion reserved for qualified institutional buyers. Such investors must bid for at least Rs 10 crore worth of shares.

The government expects to raise up to Rs 16,000 crore through the IPO, billed as the country’s largest issue ever.

Coal India had earlier said the IPO for 630 million shares, translating to 10 per cent equity in the company, would open on October 18.

The price band of the IPO will be finalised on October 12.