Tags: Coal | India | Ends | IPO

Coal India Ends IPO With $48.7 Billion of 'Hard Cash’

Thursday, 21 Oct 2010 03:56 PM

Coal India Ltd., the world’s biggest producer of the fuel, ended the last day of its initial share sale with at least 2.16 trillion rupees ($48.7 billion) of bids.

Investors offered to buy almost 9.6 billion shares, or 15.2 times the 631.6 million shares on offer, according to data on the National Stock Exchange’s website as of 6 p.m. local time today. The shares are on sale for 225 rupees to 245 rupees apiece. Only retail investors were able to bid today.

“This gives you the confidence that an Indian deal can attract up to $50 billion in demand,” said Dharmesh A. Mehta, managing director for institutional equities at Enam Securities Pvt. The investment bank is managing the transaction along with Citigroup Inc., Deutsche Bank AG, Bank of America Corp., Kotak Mahindra Capital Co. and Morgan Stanley.

Investors have flocked to the offering on expectations that Coal India stands to benefit from surging energy demand in India, where 56 percent of power is generated from the fuel, according to August data from the Central Electricity Authority. India may need to more than quadruple power generation capacity by 2030 to sustain growth in Asia’s second-fastest growing major economy, according to the Planning Commission.

The sale of the 10 percent stake in Coal India, through which the government aims to raise as much as 151.5 billion rupees, is set to top the 116 billion rupees in the initial public offering by billionaire Anil Ambani’s Reliance Power Ltd. in January 2008.

Mutual funds and institutional investors were allowed to bid for Coal India shares from Oct. 18 until yesterday evening.

Margin Money

“This is hard cash, compared to the last record IPO, when institutional investors only had to put in 10 percent as margin money,” Mehta said by phone from Mumbai. The capital markets regulator in May began requiring bidders to put up their entire application money upfront.

The share sale may help the government meet about 38 percent of the 400 billion rupees target it set to raise by selling shares in state-run companies in the year ending March 31 to trim the budget deficit.

Overseas investors have bought a record 1.08 trillion rupees of Indian equities this year, pushing the benchmark Sensitive Index earlier this month to its highest level in 2 1/2 years.

The Coal India offering cements Kotak Mahindra’s No. 1 ranking in managing initial share sales in India in 2010, with Enam Securities as No. 2, in a year in which Indian IPOs have raised 179 billion rupees, according to data compiled by Bloomberg.

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