CENTRE TO SELL 3% STAKE IN COAL INDIA

The government will sell a 3 per cent stake in Coal India for ~266 a share through the offer for sale (OFS) route. This may fetch the exchequer ~50 billion, according to sources. The government will offer an additional 6 per cent stake in the case of over-subscription, sources said. The two-day OFS will open on Wednesday for institutional bidders. Retail investors, who can bid for the OFS on Thursday, will get an additional 5 per cent discount. If the entire 9 per cent stake in Coal India could be sold, it could fetch the Centre about ~150 billion.

Even after Coal India Ltd (CIL) sought an extension from Sebi to comply with certain norms, the Maharatna has decided to follow the regulator’s guidelines and will offer a maximum of nine per cent shares of the government to institutional and non-institutional buyers.

On Wednesday, the coal ministry will offload three per cent stake to institutional and non-retail shareholders while retail investors will be offered the remaining shares on Thursday (November 1).

However, the company has kept the option open to sell an additional six per cent stake. Sources in Coal India suggest that the total realisation from a nine per cent stake sale could be around ~145 billion.

Moreover, sources said retail investors will be offered a five per cent discount over the floor price of ~266 per share.

In case the oversubscription option is exercised, the government’s shareholding will fall to 69.32 per cent while a three per cent offloading will bring down its shareholding to 75.32 per cent. Currently, the government owns 78.32 per cent in the company.

Oversubscription is a situation where investors order more shares than offered by the company. This may affect the price when the equity is actually issued.

Company officials are of the view that the issue is most likely to be oversubscribed and the entire

targeted amount of ~145 billion via this stake sale can be realised.

“The discount offered to retail investors is bound to generate more interest and may actually result in oversubscription,” a company official said.

The floor price is lower by over three per cent than the price at which Coal India shares have been trading recently. On Tuesday, at the end of the day’s trade, the Maharatna’s shares closed at ~275.90.

Earlier, as Coal India shares remained in the sub-~300 bracket, the government had decided to postpone the stake sale, and in turn, Coal India had applied to Sebi to push the deadline to meet its norms.

Sebi norms stipulate that the government may hold a maximum of 75 per cent in any public sector undertaking. An earlier deadline was set for Coal India which expired in August.

Sources suggested that the government had initially planned to offload 10 per cent of its stakeholding by targeting to raise ~200 billion via this effort. The money thus collected would be infused for national infrastructure and other developmental projects but tepid share prices had made the government postpone the sale.

A senior Coal India official said after this stake sale plan to the public, a further one per cent stake sale may be offered to employees.