Mumbai: State-owned Coal India Ltd and Bharat Sanchar Nigam Ltd (BSNL) are the prime candidates to list on Indian bourses under the government’s new rules for selling stakes in state firms, but valuations will have to be tempered to attract investors.
The government said last week that unlisted state firms making profits in the past three consecutive years should list, as the country looks to fuel growth without further widening a large fiscal deficit. The initial public offering (IPO) windfall could raise at least $10 billion (Rs46,600 crore) and prompt significant inflows of foreign investment. Coal India and BSNL are among firms meeting the new rules.
Coal India chairman Partha Bhattacharyya said his firm has been advised by the Centre to appoint an independent financial adviser for a potential IPO. “We expect to make the appointment by December,” he said.
BSNL chairman Kuldeep Goyal said the government has to decide the timing for any potential IPO of his company.
This follows recent strongly subscribed IPOs of state-run NHPC Ltd and Oil India Ltd, which together raised $1.8 billion. Oil India also made a strong market debut, with analysts widely agreeing its valuations were attractive. But NHPC and private sector firms Adani Power Ltd and Indiabulls Power Ltd made muted debuts, with analysts blaming high IPO prices.
“The valuations offered by the government have to be reasonable,” said Phani Sekhar, fund manager at Angel Broking.
The government would also do well to time any potential offerings when the stock market is on an uptrend, he said. “If the government does not want to compromise on valuations, as in the case of NHPC, then it has to choose its timing very carefully,” he said.
The government also said all profitable, listed state firms must have at least 10% of their shares in public hands. The government should raise about $5.5 billion by selling stakes in such firms in which it holds more than 90%, according to Standard Chartered estimates.
Such firms include MMTC Ltd, Hindustan Copper Ltd, Rashtriya Chemicals and Fertilizers Ltd, Neyveli Lignite Corp. Ltd, National Fertilizers Ltd, State Trading Corp. of India Ltd, NMDC Ltd and Andrew Yule and Co. Ltd.