New Delhi: The initial public offering (IPO) planned by Coal India Ltd (CIL), the world’s largest producer, may be delayed by at least two months to September, according to two people with direct knowledge of the development.
The state-run producer has yet to secure final government approval for the offer, the people said, declining to be identified because the information is confidential. CIL planned to raise as much as Rs13,000 crore in a share sale in July, two government officials had said in April.
At least 29 firms delayed or cancelled equity sales in May as Europe’s debt crisis triggered the biggest decline in emerging market stocks since October 2008. India needs to complete sales including Engineers India Ltd and Steel Authority of India Ltd to raise a record Rs40,000 crore this year.
“Fund managers across Europe and the US would be reluctant to allocate money because of the difficult market situation right now,” said Taina Erajuuri, who helps manage the equivalent of $1.2 billion (Rs5,580 crore) of emerging market stocks at Helsinki-based Fim Asset Management Ltd. “I would prefer to allocate money after September when it’s clearer where the markets are headed.”
CIL intended to sell shares by July or the first week of August, chairman Partha Bhattacharyya said 26 April. The planned sale would overtake Reliance Power Ltd’s Rs11,560 crore offering in January 2008 as India’s biggest, according to data compiled by Bloomberg.
A.K. Sinha, finance director at CIL, couldn’t be reached at his office in Kolkata, where the company is based. Sidhartha Pradhan, official spokesman at the department of disinvestment, wasn’t immediately available to comment.
Citigroup Inc., DSP Merrill Lynch and Co., Deutsche Bank AG, Morgan Stanley, Enam Securities Pvt. Ltd and Kotak Mahindra Capital Co. Ltd are likely to manage the share sale, two bankers familiar with the plan said in May. The sale arrangers will be formally appointed at the same time the cabinet approves the sale, one of the persons said.
The government will then make a final decision on timing, the person said.
The benchmark Sensex declined 3.5% in May, the first drop since January, as overseas investors sold a net Rs9,440 crore of equities, the most since October 2008. The MSCI Emerging Markets Index fell 9.2% during the month.
On Tuesday, the Sensex dropped 2.2% in Mumbai trading, ending a four-day winning streak. The Bombay Stock Exchange’s BSE-PSU Index of 54 state-owned companies fell 1.7% after gaining as much as 0.3% on Tuesday.