The government has fixed a floor price of Rs 358 a share for its up to 10% stake sale in Coal IndiaBSE -3.81 % on Friday. This is a 4.6% discount to the closing price of Rs 375.15 for the company's shares on the Bombay Stock Exchange on Thursday. Retail investor will also get another 5% discount on the final offer price. Twenty per cent of the issue has been reserved for retail investors.
The government is selling 5% of company's shares through an offer for sale with an option to sell another 5% for a maximum 10% divestment. At this floor price, the government will get Rs 22,600 crore if the greenshoe option is exercised. Such an option allows seller to offer more shares if there is good demand. The government currently has 89.65% stake in the coal monopoly.
The government is selling 5% of company's shares through an offer for sale with an option to sell another 5% for a maximum 10% divestment. At this floor price, the government will get Rs 22,600 crore if the greenshoe option is exercised. Such an option allows seller to offer more shares if there is good demand. The government currently has 89.65% stake in the coal monopoly.
In October 2010, Coal India was listed through a record initial public offer (IPO) that raised Rs 15,199 crore. At the IPO price of Rs 245 apiece, the issue was oversubscribed 15 times.
Most market experts said the issue is attractively priced. If the 10% stake sale goes through, the government will be able to meet almost half of its disinvestment target. It has so far managed to raise Rs 1,715 crore through a 5% divestment in Steel Authority of India (SAIL) against a record target of Rs 58,425 crore, of which Rs 43,425 crore was to come from stake sale in state owned firms.
The balance Rs 15,000 crore is to come from government's remaining stake in privatised companies such as Hindustan Zinc. Earlier this week, oil minister Dharmendra Pradhan had said the government will off-load stake in state-run Oil and Natural Gas Corporation (ONGC) this fiscal subject to conducive market conditions.
A 5% stake sale in ONGC it may fetch another Rs 15,000 crore, bringing the governemnt closer to the disinvestment target. According to officials, next in line are Power Finance and Rural Electrification Corp.
In the past few years, asset sales have fallen short of target. In 2013-14, the government could mobilise just Rs 15,820 crore against a target of Rs 40,000 crore. In 2012-13, disinvestment yielded Rs 23,957 crore against a target of Rs 30,000 crore. Nomura said the company could announce a dividend once the offer closed. "As has historically been the case, we believe CIL may well consider declaring an interim dividend next month" it said in a report.
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