Coal India offer for sale: Institutional part subscribed 1.6 times

Rs 4,160-cr OFS sees bids worth Rs 6,500 cr, stock falls

The central government’s first major disinvestment for the 2023-24 financial year (FY24) proved a success as its Rs 4,160-crore offer for sale (OFS) in Coal India garnered bids worth Rs 6,500 crore on Thursday from institutional investors, or 1.6 times the share on offer.

According to data provided by the stock exchanges, most bids came at around Rs 226 per share, slightly higher than the Rs 225 floor price set by the government. Shares of Coal India, though, declined by 4.4 per cent to end at Rs 231 on the BSE. In the past one year, shares of the state-owned miner have traded at a weighted average price of Rs 220.

The names of the investors who placed bids couldn’t be ascertained. Sources said a clutch of domestic mutual funds and state-owned institutions have subscribed to the shares. Axis Bank, ICICI Securities, JM Financial, Kotak Mahindra Bank and SBI Caps are the investment banks handling the share sale.

Shares worth Rs 415 crore reserved for retail investors will be auctioned on Friday. The oversubscription from institutional investors will help make up for the demand shortfall in the retail category, if any. Analysts believe the correction in shares of the company due to the OFS could be a good buying opportunity. The company on Wednesday revised upwards the price of non-coking coal, which is expected to add Rs 2,700 crore to FY24 revenues.

“We have increased our revenue estimates by 2 per cent to factor in the incremental revenues due to the price hike. We have increased our Ebitda/APAT (earnings before interest, tax, depreciation and amortisation/adjusted profit after tax) estimate by 2.4 per cent/2.5 per cent to factor in the price hike benefit, which would be partially offset by the lower e-auction premiums. Coal India trades at enterprise value or EV/Ebitda of 3.9 times FY24E. We reiterate our ‘buy’ rating on the stock with a revised target price of Rs 290 (5x EV/Ebitda). We believe the company is well placed to capitalise on the growth opportunity ahead,” said a note by Motilal Oswal.