The government on Thursday set the floor price of Coal India (CIL) stake sale at Rs 358 per share — a discount of 4.5% to Thursday’s closing price of Rs 375.15. CIL’s 10% stake sale will help the Centre raise at least Rs 22,390 crore.
Retail investors will get an additional 5% discount on the bid price and have 20% of the total offer size reserved, as per the stock exchange announcement. On Thursday, the scrip fell 2.32%, or Rs 8.90, on BSE to close at Rs 375.15.
The government had announced on Wednesday that it will sell 5% stake (31.58 crore shares) in CIL with an option to sell an additional 5% stake via the green-shoe option. If successful, government’s holding will drop to 79.65% from 89.65% as of quarter ended December 2014. The company is required to pare its stake to 75% under the Sebi’s minimum public shareholding (MPS) norms.
Bank of America Merrill Lynch, Credit Suisse, Deutsche, Goldman Sachs, JM Financial, Kotak Investment Banking, and SBI Capital Markets are managing the CIL auction.
CIL went public by selling 10% stake and raised Rs 15,200 crore through its initial public offering (IPO) in November 2010 — the biggest IPO ever. The issue was subscribed 15.28 times on the final day of book building process.
Market experts said there is appetite for CIL shares citing consistent improvement in the company’s coal production and off-take, along with valuations. While CIL has gained more than 32% in 2014, analysts believe the current valuations are attractive given the long-term fundamentals of company. Twenty two analysts have a ‘buy’ rating on the stock, 18 have a ‘hold’ rating and nine have assigned ‘sell’ rating on the stock, shows an analysts poll conducted by Bloomberg.
Success of CIL auction will also mean the government will raise nearly 40% of Rs 58,425 crore targeted 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 Corp (Rs 1,900 crore), Rural Electrification Corp (Rs 1,700 crore), and Nalco (Rs 1,200 crore) among others.
The government’s stake sale programme got a further boost on Wednesday after oil minister Dharmendra Pradhan reiterated the government’s commitment to conduct stake sale in Oil & Natural Corp (ONGC) this fiscal. The plan was likely to be scrapped following “poor” feedback from foreign investors during the international road shows.
Given the commitment to conduct 5% sale in ONGC, the government may raise an estimated Rs 62,000 to Rs 63,000 crore on current market rates. This positions the Centre to achieve its disinvestment target for the first time since FY04.
The government has set a target to raise a total Rs 58,425 crore, of which Rs 43,425 crore is planned through PSU stake sale and the balance from selling residual stake owned by a government agency in erstwhile PSUs.
Finance minister Arun Jaitley has recently indicated that the government has lined up an aggressive disinvestment programme to meet the fiscal deficit target of 4.1% in the current fiscal.
“We still have close to three months left…this is going to be period of great activity as far as disinvestment is concerned. I am not going to give any indication but major disinvestment in the coming months prior to March 31 is going to take place,” Jaitley said in a TV interview.
The Centre is heavily dependent on CIL and ONGC to meet its target. Even last year, the government had proposed to sell 10% stake in the state-owned coal mining company but attracted stiff opposition from workers union, 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.