New Delhi: The government will raise up to $3.5 billion from a price band of Rs 225 to 245 for state-run Coal India’s initial public offering, the largest in the country’s corporate history.
The government is selling 631.6 million shares, or 10% stake in the world’s largest coal miner. The share sale is part of the country’s plan to divest its stakes in roughly 60 companies over the next few years.
“I think the pricing is much better than what we were expecting. We were expecting it to be Rs 260 at the upper end,” said Ambareesh Baliga, vice president of Karvy Stock Broking in Mumbai.
“The response from institutional investors is expected to be very good,” he added.
Priced at the top end of the band, the company would be valued at $35 billion, placing it among the top Indian firms by market value. It is the seventh-largest IPO in Asia this year.
Speaking to reporters on Tuesday, the Union coal minister said the IPO would raise more than Rs 15,000 crore.
Coal India, based in Kolkata, holds a dominant position in the fast-growing Indian market. The state monopoly produced 431 million tonnes in 2009-10 and accounts for nearly 80% of coal output in Asia’s third-largest economy.
Coal powers 75% of India’s electricity output, and annual demand is expected to swell at 11%. The country, which faces a peak-hour power deficit of nearly 14%, plans to triple its generation capacity over the next decade.
It reported earnings per share Rs 15.60 for the fiscal ended March 2010.
According to a Reuters poll of fund managers, potential investors in state-run Coal India’s IPO had expected the issue to be priced around Rs 250 ($5.63) a share, or 16 times trailing earnings.
China’s Shenhua Energy, the Indian miner’s closest rival, trades at 16 times earnings, while smaller Indonesian peer Adaro Energy has a price-to-earnings ratio of 20 times. US miner Peabody Energy trades at 25 times earnings.
The IPO opens on 18 October and closes on 21 October. The listing on the Bombay Stock Exchange is expected by 4 November.
Morgan Stanley, Citigroup, Kotak Mahindra Capital, Enam Securities, Deutsche Bank, and Bank of America-Merrill Lynch are the managers for the offer.