NEW DELHI: The Indian government will raise up to $3.5 billion from a price band of 225 rupees to 245 rupees for state-run Coal India’s initial public offering, the largest in the country’s corporate history.
The Indian government is selling 631.6 million shares, or 10 percent stake in the world’s largest coal miner. The share sale is part of the country’s plan to divest its stakes in roughly 60 companies over the next few years.
“I think the pricing is much better than what we were expecting. It was expected to be 260 rupees at the upper end,” said Ambareesh Baliga, vice president of Karvy Stock Broking in Mumbai.
“The response from institutional investors is hoped to be very good,” he added.
Priced at the top end of the band, the company would be valued at $35 billion, placing it among the top Indian firms by market value. It is the seventh-largest IPO in Asia this year.
Speaking to reporters on Tuesday, the country’s coal minister said the IPO would raise more than 150 billion rupees.
Coal India, based in the eastern city of Kolkata, holds a dominant position in the fast-growing Indian market. The state monopoly produced 431 million tons in 2009/10 and accounts for nearly 80 percent of coal output in Asia’s third-largest economy.
Coal powers 75 percent of India’s electricity output, and annual demand is expected to swell at 11 percent. The country, which faces a peak-hour power deficit of nearly 14 percent, plans to triple its generation capacity over the next decade. It reported earnings per share 15.60 rupees for the fiscal ended March 2010.
According to a Reuters poll of fund managers, potential investors in state-run Coal India’s IPO had expected the issue to be priced around 250 Indian rupees ($5.63) a share, or 16 times trailing earnings.
China’s Shenhua Energy, the Indian miner’s closest rival, trades at 16 times earnings, while smaller Indonesian peer Adaro Energy has a price-to-earnings ratio of 20 times. US miner Peabody Energy trades at 25 times earnings.
The IPO opens on October 18 and closes on October 21. The listing on the Bombay Stock Exchange is expected by November 4.
Morgan Stanley, Citigroup, Kotak Mahindra Capital, Enam Securities, Deutsche Bank, and Bank of America-Merrill Lynch are the managers for the offer.
