Coal India $3.5 billion IPO fully subscribed

By Prashant Mehra and Devidutta Tripathy

MUMBAI/NEW DELHI (BestGrowthStock) – Coal India’s initial public offering was oversubscribed on Tuesday, the second day of a four-day offering, driven by strong investor demand and lower-than-expected pricing for the country’s largest-ever IPO.

The offering, expected to raise as much as $3.5 billion, had received bids for more than a billion shares by 1100 GMT, far exceeding the 631.6 million shares in the IPO.

The offer was 1.7 times subscribed at 1100 GMT. Most of the bids were at the top end of the range, exchange data showed.

“The response so far appears to be good, considering that there are still two more days for them (investors) to come in,” Chairman Partha Bhattacharyya said in the Reuters Trading India chatroom.

If priced at the top of its 225 to 245 rupee price range, Coal India would have a market value of $35 billion, ranking it seventh among India’s listed firms.

It would surpass billionaire Anil Ambani’s Reliance Power

listing in 2008 as India’s largest new issue.

Institutional buyers, which account for half the offer size, had bid for more than 1.5 times the shares on offer by Tuesday afternoon. Most of these bids had come from overseas investors.

Coal India’s IPO closes on Wednesday for institutions and on Thursday for retail investors.

“We are seeing very good retail participation for Coal India,” said Deven Choksey, managing director and CEO of wealth manager KR Choksey. Choksey is advising his clients to subscribe to the issue, based on the company’s growth potential.”

Large IPOs in India typically see the heaviest subscription toward the close of the offering.

“As far as retail is concerned, I am not sure if it will be fully subscribed tomorrow, but by the day after it will be oversubscribed,” Bhattacharyya said in the Reuters chatroom.

The offer is expected to draw billions of dollars from global investors who have been pouring money into emerging markets such as India in recent months in search of higher returns.

A Reuters poll of fund managers last week had estimated the offer price at around 250 rupees a share, indicating strong interest for the miner’s dominant market position in an economy growing at 8.5 percent and attractive valuations.

STRONG OUTLOOK

Bhattacharyya said the firm’s coal output in the current fiscal year is expected to rise 6.8 percent from a year earlier. He also said the world’s largest coal miner was unlikely to add new mines this fiscal year.

Bhattacharyya, who holds a degree in physics and hails from the eastern state of Orissa in India’s mineral belt, started in the industry 33 years ago as a Coal India trainee.

Kolkata-based Coal India accounts for nearly 80 percent of the coal output in Asia’s third-largest economy.

It expects profits to rise by a quarter this fiscal year, driven by demand for electricity in India, three-quarters of which is fueled by coal. Demand for coal is forecast to grow 11 percent a year in India, which aims to halve its peak-hour power deficit of nearly 14 percent over the next two years.

At the top of its price range, Coal India would be valued at 15.7 times trailing earnings.

China’s Shenhua Energy trades at 16 times trailing earnings, while smaller Indonesian peer Adaro Energy has a ratio of 20 times. U.S. miner Peabody Energy trades at 25 times earnings.

The Indian government is selling a 10 percent stake in the world’s largest coal miner as part of India’s broader effort to divest stakes in roughly 60 companies in the next few years.

Brokerages have estimated that Coal India commands a premium of roughly 30 percent to its valuation range, due to lower earnings volatility, a large undeveloped resource base and potential to increase prices.

Morgan Stanley, Citigroup, Kotak Mahindra Capital, Enam Securities, Deutsche Bank and Bank of America-Merrill Lynch are managers on the offer.

(Additional reporting by Ruchira Singh; Editing by Jui Chakravorty, Mike Nesbit)

Coal India $3.5 billion IPO fully subscribed