Even after Coal India sought an extension from Sebi to comply with certain norms, the Maharatna Company has decided to proceed on the same and will be offering a maximum of nine percent government’s shares to institutional and non-institutional buyers.
On 31st October, the coal ministry, on behalf of the President of India – the largest shareholder in Coal India – will offer three percent stake to the institutional and non-retail shareholders while retail investors will be offered the remaining shares on 1st November. However, the company has kept the option open to sell an additional six percent shares. Sources in Coal India suggest that the total realisation from a nine percent stake sale will be around Rs 145 billion. Moreover, retail investors will be offered a five percent discount over the floor price of Rs 266 per share.
In case the oversubscription option is exercised, the government’s shareholding will fall to 69.32 percent while a three percent offloading will bring down its shareholding to 75.32 percent. Currently, the government owns 78.32 percent in this company.
Oversubscription is a situation where investors order for 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 Rs 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 30th October, at the end of the day’s trade, the Maharatna Company’s shares closed at Rs 275.90 apiece.
Earlier, as Coal India shares remained in the sub-Rs 300 bracket, the government had decided to postpone the stake sale and in turn, Coal India had applied with Sebi to push the deadline to meet its norms.
Sebi norms stipulate that the government may hold a maximum of 75% in any public sector undertaking and had set an earlier deadline for Coal India which expired in August this year.
Sources suggested that the government had initially planned to offload 10% of its stake holding by targeting to raise Rs 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 to postpone the sale.
A senior Coal India official said that after this stake sale plan to the public, a further one percent stake sale may be offered to employees.
Source: The Hindu