New Delhi / Mumbai: The Union cabinet on Thursday deferred a decision to approve stake sales in state-run miners Coal India and Hindustan Copper that between them could be worth up to $3.7 billion.

Union mines minister B K Handique, speaking to reporters, did not give any reason for the deferred decision.

Investment bankers with direct knowledge of the Coal India issue said they were working on its prospectus and had not been informed of any possible delay in the offering.

The global market for initial public offerings, which had shown signs of a resurgence early in the year, has seen a spate of delays and downsizings, underscoring challenges facing planned mega deals such as Agricultural Bank of China’s around $20 billion IPO.

“The market volatility and broad background noise is causing investors to keep cash in their hands rather than making a commitment at the moment," said Stephen Pope, chief global equity strategist at Cantor Fitzgerald in London.

“For the time being, I think there will be a slowdown in new offerings."

New Delhi is planning to sell a 10% stake in Coal India, the world’s largest coal miner, through an initial public offering to raise roughly $2.7 billion, in what could be India’s largest share sale ever.

“It’s still a work in progress for us and we are working on this, keeping the September timeline in mind," one of the investment bankers, who declined to be named as he is not authorised to speak to the media, told Reuters.

Hindustan Copper is expecting the government to approve its plan for a 20% stake sale to raise up to about Rs5,000 crore ($1.06 billion), its chairman Shakeel Ahmed told Reuters last week.

Coal India had been looking to launch its offering by August, although a government official recently told Reuters that a September listing was planned.

The same official said volatile stock markets had not changed plans to sell stakes in state-run firms.

Officials at Coal India and Hindustan Copper were not immediately available for comment.

State utility Satluj Jal Vidyut Nigam raised $240 million in an IPO last month, the first share sale by the government in the fiscal year that started 1 April.

While the offering was comfortably covered at 6.6 times, its lacklustre market debut was the latest in a string of uninspiring showings by the government share sales.

The SJVN stock was trading up 0.8% at Rs24.30 on Thursday, still below its issue price of Rs26 a share.

Stake Sale Plans

Indian companies have raised a total of $10.7 billion through share sales so far this year, compared with $2.6 billion in the same period last year and about $16 billion in 2009, according to Thomson Reuters data.

Share sales in state-run miner NMDC Ltd, top power producer NTPC Ltd and power finance company Rural Electrification Corp figure among the top 10 equity issuances in 2010, the data showed.

India has shortlisted six banks including Citigroup, Bank of America-Merrill Lynch and Morgan Stanley for managing the Coal India issue, while banks for the Hindustan Copper issue are expected to be finalised next week.

The stake sales in Coal India and Hindustan Copper are part of a government plan to offload minority holdings in 60 state firms in coming years. The government aims to generate Rs40,000 crore ($8.5 billion) via stake sales in state firms in this fiscal year, although persistently weak markets could make that a difficult target.