CIL offer price of Rs 358 to fetch govt Rs 22,600 cr

The biggest ever divestment by the Union government is set to kick off on Friday with the offer for sale (OFS) by Coal India. 

The offer price, which has been set at Rs 358, is nearly at a 5 per cent discount to Thursday’s closing price of Rs 378.30 at the NSE. With an additional 5 per cent discount to retail investors, experts and brokerages do believe that the offer certainly provides a good opportunity for retail investors.

“The pricing is really attractive from a retail investor perspective and so I would definitely recommend retail investors to participate in the issue,” Arun Kejriwal, founder, Kejriwal Research, told Deccan Herald. 

Looking at the past history of its public issue (Coal India IPO), I expect retail investors to bid at a price higher than the floor price, Kejriwal added.

The OFS comprises an offer for sale of 31,58,18,220 equity shares of face value Rs 10 each with an option to sell an additional 31,58,18,220 equity shares of face value Rs 10 each of the company, collectively aggregating to 10 per cent of the total paid-up equity share capital. 

At the offer price, the government could mop up Rs 22,600 crore for the 10 per cent stake. The OFS would take place through a separate window at both NSE and BSE stock exchanges on Friday (January 30) from 9.15 am to 3.30 pm.

DSP Merrill Lynch, Credit Suisse Securities (India) Private, Deutsche Equities India Private, Goldman Sachs (India) Securities Private, JM Financial Institutional Securities, Kotak Securities and SBICAP Securities are the seven appointed brokers for the issue.

“Robust demand for coal arising from different industries gives clear and sustainable revenue visibility for a long time for Coal India. It has a dominant position in the Indian coal industry; this along with low cost competitive advantage puts the company in a sweet spot,” Way2Wealth said in a report on Coal India OFS.

At the current market price of Rs 378, it quotes at a P/E of 16.4x its TTM (trailing twelve months) earnings per share of Rs 23 and we recommend investors to subscribe to the OFS under the retail category, Way2Wealth adds.

“At the OFS floor price of Rs 358, it is available at 6.2x FY17 EV/EBIDTA, lower than its average of 7.3x. We believe Coal India would be a major beneficiary of the new government's focus on fuel security,” IIFL said in a note.

“The government has doubled the quota for retail investors to 20 per cent from 10 per cent and would also provide a 5 per cent discount to retail investors and so we believe that the OFS is a good opportunity for retail investors to participate,” IIFL added.