Coal India IPO subscription attracts huge demand, oversubscribed 1.7 times

The country’s biggest ever initial public offering (IPO) floated by Coal India Ltd (CIL) attracted a demand that was 1.7 times the number of shares on offer at the close of the second day on Tuesday. Eager buyers put in bids for 99.11 crore shares while 63.1 crore scrips were on offer, the stock exchange data showed.

The issue is priced in the range of Rs. 225 and Rs. 245 a share. At the upper end of price range the Coal India public issue will fetch Rs. 15,400 crore while at the lower end of the band it will fetch about Rs. 14,200 crore. Analysts expect the issue to be valued close to the upper band as it is being oversubscribed.

The offer closes on October 21. For institutional buyers the IPO will close on October 20. Issue price will be decided by a Group of Ministers (GoM) on October 23. Market analysts are of the view that participation from retail investors will pick up in the last two days, as they usually take a cue from institutional investors. October 21 has been kept as an additional day exclusively for retail investors to apply.

Anil Ambani Group firm Reliance Power had raised Rs. 11,500 crore through an IPO in January 2008, which was, until now the country’s biggest. The Centre is divesting 10 per cent stake in CIL, which accounts for as much as 82 per cent of the total coal production in India.

Citigroup Global Markets India, Deutsche Equities India, DSP Merrill Lynch, Enam Securities, Kotak Mahindra Capital and Morgan Stanley India are book running lead managers to the CIL IPO. The follow-on public offerings (FPO) of blue- chip public sector firms Steel Authority of India Ltd (SAIL), Indian Oil Corp (IOC) and Oil and Natural Gas Corp (ONGC) are also expected to hit the stock market between January to March next year, disinvestment secretary Sumit Bose said.

Bose indicated that the three big issues would be adjusted so that there is only one issue in each month in order to avoid overcrowding in the market. “ There is enormous appetite in the market,” he said.

However, the government will not go ahead with the public issues of trading company MMTC and steel producer Rashtriya Ispat Nigam Ltd (RINL) during the current financial year, he added.

The public offers will help both the government narrow its fiscal deficit and enable the public sector companies to raise resources for further expansion. Finance minister Pranab Mukherjee has set a target of Rs. 40,000 crore through the disinvestment route during this fiscal.