Subscribed 1.07 times; ‘big’ retail buying
The 10% stake sale of Coal India (CIL) was subscribed more than 1.07 times on Friday with huge amount of shares bid by Life Insurance Corporation (LIC) and foreign portfolio investors.
Sources in the know told FE that the state-owned insurance behemoth bought shares worth over R10,000 crore, which represents a 4.2-4.3% stake in the coal mining company. Foreign funds are likely to have bought CIL shares worth R6,500-7,500 crore ($1.0-1.2 billion) with one large foreign institution placing a bid of $350-400 million.
Stock exchange data showed that the R23,000-crore auction — the biggest ever equity offering — was subscribed 1.07 times at the time of going to press. The auction saw 67.52 crore shares bid against 63.16 crore shares on offer.
The share sale was subscribed 0.51 times as of 2.25 pm and just 0.3 times as of 1.45 pm, exchange data showed.
Foreign funds like Capital Group and Segantii Capital are believed to have participated in the auction. Among domestic institutions, State Bank of India (SBI), apart from various other state-owned as well as private sector banks, are known to have participated in the share sale. In addition, domestic insurance companies as well as mutual funds also bid for CIL shares.
The non-retail book was subscribed 1.23 times. More than 61.95 crore shares were bid by various foreign and domestic institutions, data showed.
The government is assured of at least Rs 23,000 crore from the stake sale, but at the time of going to press, the Centre was still deliberating on exercising the greenshoe option.
Retail investors bid worth Rs 2,000-2,100 crore and the book was subscribed 0.4 times. Sources affirmed that retail participation was encouraging given the size of CIL auction despite a shorter time frame in arranging funds for an offer for sale and the 500-point fall in the Sensex. “In my opinion retail participation in the CIL share sale has been successful. The retail subscription appears small but the value of shares bid by them is roughly Rs 2,000-2,200 crore, which is even larger than many IPOs (initial public offering) of the recent past,” said one person familiar with the development on condition of anonymity.
On Friday, the CIL scrip closed 3.81% or Rs 14.30 lower on the BSE at Rs 360.85 per share. In comparison, the Sensex lost 1.68%.
The government had on Wednesday announced it would sell a 5% stake (31.58 crore shares) in CIL with an option to sell an additional 5% stake via the greenshoe option. The government’s holding will drop to 79.65% from 89.65% it held as on quarter ended December 2014. The government is required to pare its stake to 75% under the Securities and Exchange Board of India’s (Sebi) minimum public shareholding (MPS) norms.
Bank of America Merrill Lynch, Credit Suisse, Deutsche, Goldman Sachs, JM Financial, Kotak Investment Banking and SBI Capital Markets were managing the CIL auction.
CIL went public by selling a 10% stake and raised Rs 15,200 crore through its IPO in November 2010, the biggest new share sale ever. The issue was subscribed 15.28 times on the final day of book-building process.
The success of the CIL auction will also mean that the government will raise nearly 56% of the Rs 43,425 crore targeted through stake sales for the current fiscal. In addition, the Centre has lined up Indian Oil (Rs 8,200 crore), NMDC (Rs 5,600 crore), BHEL (Rs 3,400 crore), Power Finance Corporation (Rs 1,900 crore), Rural Electrification Corporation (Rs 1,700 crore) and Nalco (Rs 1,200 crore), among others.
The success of other issues will position the Centre to achieve its disinvestment target for the first time since FY04.
The Centre was heavily dependent on CIL and ONGC to meet its target. Even last year, the government had proposed to sell 10% in the state-owned coal mining company but attracted stiff opposition from trade unions, forcing the government to postpone the deal. Instead, the government collected Rs 18,317 crore in special dividend from CIL last fiscal to boost its coffers.