Coal India made a sizzling debut on Thursday. Deutsche Equities India’s Sanjay Sharma tells FE’s Samie Modak why the IPO was a hit and more.

The $3.5-billion Coal India IPO attracted bids worth almost $50 billion. What was the reason for its huge success?

Coal India is a fundamentally strong company and a global leader. With a market capitalisation of Rs 2.16 lakh crore ($48 billion), Coal India is now the country’s fourth largest company. Investors like to participate in larger IPOs. The timing was good given the momentum in the secondary market. And most importantly, the pricing was fair compared to global peers.

What kind of investors participated in the issue ? How was the quality of the book?

The book was well balanced with strong demand from all categories. On the institutional side, about a third of demand was from domestic investors. Among foreign investors, it was well distributed among Asia, Europe and the US.

Will the over $40 billion of IPO refunds flow into the secondary market?

I don’t think so. Investors review the investment opportunities available at a particular point of time. A part of refund money may flow into the market. To expect anything significant is too wishful.

Sebi has doubled the cap for retail investors. Do you think it will improve retail participation?

The average retail application size used to be Rs 40,000-45,000, while the Coal India issue saw about Rs 65,000. The average retail investment is increasing and hence it?s a good move.

How will the Coal India IPO boost the government?s disinvestment plan?

There is no doubt that it will improve investors sentiment. But at the same time you cannot compare an IPO with a follow-on offering (FPO). In an FPO you already have a price benchmark, so an investor can buy from the secondary market and need not wait for the FPO.

Will primary issuances expected this fiscal impact the secondary market?

The supply of primary paper balances out the FII inflows between primary and secondary markets. Primary market typically takes a lead from the secondary market. At the start of 2010, markets expected a rush of primary paper but issuances have been spread out.

Do you think merchant bankers are not leaving enough money on the table for investors in IPOs?

If you are investing in an IPO which gets listed two weeks later, the company fundamentals are not going to change so much as to expect a 30-40% jump on listing. What can change from the date of IPO to its listing is your price expectation. Yes, 10-15% premium is appropriate since you are putting in money in a company which doesn?t have a market track record.