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Cil in top league after ipo success
Coal Insights Bureau
Coal India Ltd (CIL) is aiming at a plum position among
the top 10 valued companies when its shares get listed
in the stock exchanges on November 4, a day ahead
of Diwali. In keeping with expectations, a panel of ministers
has finalised the offer price at `245 per share, paving the
way for the listing of the company’s shares in the Bombay
Stock Exchange and National Stock Exchange. There were all
indications that the government is likely to price the IPO at the
top end of the price range, raising about $3.5 billion.
India is selling stakes in around 60 firms over the next few
years, and the strong appetite for Coal India contrasts with
the sluggish demand for some of its recent offerings and adds
pressure on the government to price future deals attractively.
SCI keen on logistics JV with CIL
Tamajit Pain
State-owned Shipping Corporation of India (SCI) is
keen to forge an alliance with Coal India Ltd (CIL) for
transporting coal. The company hopes to have the JV
unit with Coal India Ltd and it is likely to be a 50:50
partnership, according to SCI chairman and managing
director S. Hajara. SCI had already inked a JV with SAIL
for acquisition of Panamax bulk carriers.
The joint venture will look into handling CIL’s coal
import requirements. Meanwhile, CIL’s tender for import
of coal would likely be issued after the initial public
offering gets over in November, according to its chairman
Partha S. Bhattacharyya. “We will finalise the import
tenders only after the IPO. We will issue the tenders
definitely this year. How much would be imported would
be finalised only during that time,” he said. According to
senior officials in the company, the coal major will import
around 6 million tons (mt) of coal this year and around 4
mt will be earmarked for NTPC Ltd.
Meanwhile, the government has approved selling its
10 percent stake in SCI and allowed it to raise 10 percent
fresh equity, paving the way for `1300-crore public issue
that is likely to hit markets by December. After the
issue government holding in SCI will come down from
80.12 percent to 63.75 percent. The timeline for the IPO
will be drawn up in consultation with the shipping and
divestment ministries and the funds generated will be
part-utilised for SCI's acquisitions. SCI has 28 vessels
on order and around 30 more vessels are to be ordered.
The last vessel in the series is expected to be delivered by
end-October 2010. With addition of this vessel, SCI's fleet
strength will go up to 75.
Coal India's IPO, the largest in the country's history, was
subscribed more than 15 times by close on October 21, with
most bids at the top end of the 225 to 245 rupees price range.
The four-day initial public offer of Coal India Ltd (CIL)
made history by generating bids worth `2,35,290 crore. It is
expected fetch the government over `15,000 crore, the largest
sum ever garnered in India through a share sale. The IPO,
which had a price band of `225-245 per share, generated total
demand for over 960.36 crore shares, though only 63.16 crore
equities were on offer. Individual investors and Coal India
staff will get a 5 percent discount on the offer price.
At this price, Kolkata-based Coal India, which accounts
for nearly 80 percent of coal output in Asia's third-largest
economy and is the world's largest coal miner, will be worth
$35 billion, ranking it seventh among India's listed firms.
The government sold 631.6 million shares in the IPO, which
received robust response from investors seeking exposure to
an economy growing at 8.5 percent.
The institutional order book was heavily oversubscribed,
with orders worth $27 billion from foreign investors. Those
funds poured in on top of record flows from overseas into
Indian stocks this year that recently pushed the rupee to a
25-month high. Coal India's IPO will surpass Reliance Power's
$3-billion listing in 2008 as India's largest new issue, and
comes to market amid a flurry of big deals in Asia. A dominant
position in a country that is heavily reliant on coal-fired power
and a valuation considered attractive relative to peers has
made Coal India a near must-own for investors.
Demand for coal is forecast to grow at 11 percent a year in
India, which aims to halve its peak-hour power deficit of nearly
14 percent over the next two years and triple its generation
capacity over the next decade. Coal India expects profits to
rise by 25 percent this fiscal year, helped by rising demand,
and has set aside $1.2 billion for overseas acquisitions in the
year to March 2011. It is currently evaluating proposals to buy
stakes in coal firms in the US, Australia and Indonesia.
Local and foreign brokerages estimated that Coal India
could see upside of roughly 30 percent from its IPO valuation
range, given its lower earnings volatility, a large undeveloped
resource base and potential to increase prices. Morgan Stanley,
Citigroup, Kotak Mahindra Capital, Enam Securities, Deutsche
Bank and Bank of America-Merrill Lynch are managers on the
offer. The government has sold 10 percent of its stake in the
world's largest coal producer through the public offer. Prior to
the IPO, CIL was a fully government-owned entity.
CIL is the largest coal producer in the world, with 64
billion tons of reserves as of April 2010. However, CIL will not
receive any proceeds from the offer and all proceeds will go
to the selling shareholder (GoI). Post issue the government’s
stake will come down to 89.99 percent.
COAL INSIGHTS 63 October 2010