Govt to sell 3% stake in Coal India for Rs 266 per share on Wednesday

Sebi norms stipulate that the govt may hold a maximum of 75% in any public sector undertaking and had set an earlier deadline for Coal India which expired in August this year

Even after Coal India sought an extension from Sebi to comply with certain norms, the Maharatna company has decided to proceed on the same and will be offering a maximum of nine per cent government's shares to institutional and non-institutional buyers.

On Wednesday, the coal ministry, on behalf of the President of India – the largest shareholder in Coal India - will offer three per cent stake to the institutional and non-retail shareholders while retail investors will be offered the remaining shares on Thursday. However, the company has kept the option open to sell an additional six per cent shares. Sources in Coal India suggest that the total realisation from a nine per cent stake sale will be around Rs 145 billion.

Moreover, sources said, retail investors will be offered a five per cent discount over the floor price of Rs 266 per share.

In case the oversubscription option is exercised, the government’s shareholding will fall to 69.32 per cent while a three per cent offloading will bring down its shareholding to 75.32 per cent. Currently, the government owns 78.32 per cent in this company.

OFFER DETAILS 

• Initial sale offer is for 3% of total equity with oversubscription option for another 6%
   
• Offer for sale (OFS) to non-retail investors on Wednesday and OFS to retail investors on Thursday
   
• Floor price at Rs 266
   
• Five per cent discount to retail investors who own less than 0.2 million shares in Coal India

Oversubscription is a situation where investors order for more shares than offered by the company. This may affect the price when the equity is actually issued.

Company officials are of the view that the issue is most likely to be oversubscribed and the entire targeted amount of Rs 145 billion via this stake sale can be realised.

“The discount offered to retail investors is bound to generate more interest and may actually result in oversubscription”, a company official said.

The floor price is lower by over three per cent than the price at which Coal India shares have been trading recently. On Tuesday, at the end of the day’s trade, the Maharatna company’s shares closed at Rs 275.90 a piece.

Earlier, as Coal India shares remained in the sub-Rs 300 bracket, the government had decided to postpone the stake sale and in turn, Coal India had applied with Sebi to push the deadline to meet its norms.

Sebi norms stipulate that the government may hold a maximum of 75 per cent in any public sector undertaking and had set an earlier deadline for Coal India which expired in August this year.

Sources suggested that the government had initially planned to offload 10 per cent of its stakeholding by targeting to raise Rs 200 billion via this effort. The money thus collected would be infused for national infrastructure and other developmental projects but tepid share prices had made the government to postpone the sale.

A senior Coal India official said that after this stake sale plan to the public, a further one per cent stake sale may be offered to employees.