Coal India retail book covered early on last day

*IPO covered 12.2 times at 0630 GMT, retail covered 1.7

*IPO closes Thursday for non-institutional bidders

*Offer price to be decided early next week

By Prashant Mehra and Ami Shah

MUMBAI, Oct 21 (BestGrowthStock) – Coal India’s initial public
offering worth up to $3.5 billion was oversubscribed in the
retail portion on Thursday, adding to its huge institutional
demand and hinting at success for the Indian government’s
upcoming share sales.

On Wednesday, the last day for bidding by institutions,
India’s largest ever IPO was covered nearly 12 times, with most
bids at the high end of its 225 to 245 rupee per share range,
translating into demand for roughly $40 billion.

Rajnikant Shah, a 60-year old businessman from Mumbai, has
deferred any big expenses such as travelling for the time
being, as he is investing a decent sum for this IPO.

“It is the biggest issue ever from the government. And,
there are many more lined up. That is why, they have ensured
with the pricing in place, that this one has to be a success,”
said Shah.

The offer will close on Thursday for non-institutional
bidders. Retail investors and staff will get a 5 percent
discount on the issue price.

Heavy oversubscription by institutional investors means the
offer is likely to price at or near the top of its 225-245
rupees per share range when final pricing is likely to be
decided over the weekend or early next week.

But some are hoping it will be priced below the top.

“They (government) will have to leave something on the
table for the investors, if they want good response for other
IPOs that are lined up.” said Neeraj Dewan, director of Quantum

“They will have to follow the trend that they have started.
Only if people make money, they will show good interest.”

India is in the midst of a programme to offload stakes in
some 60 state companies over the next few years, and its
efforts to date have met with mixed investor response.

At the top of the range, Kolkata-based Coal India, which
accounts for nearly 80 percent of coal output in Asia’s
third-largest economy, would be worth $35 billion, ranking it
seventh among India’s listed firms.

The government had the flexibility to price the Coal India
share sale attractively because the company is not yet listed,
but pricing for big upcoming follow-on offers by the likes of
Power Grid (PGRD.BO: ) and Hindustan Copper (HCPR.BO: ) will be
driven in part by existing valuations.

Among state IPOs on the horizon, Manganese Ore India Ltd is
readying an offering next month to raise up to $270 million.


By 12.00 pm (0630 GMT), the IPO had been covered 12.2 times
the total shares on offer, stock exchange data showed. The
retail portion had received bids for 1.68 times shares on
offer. Wealthy individuals had separately bid for 4 times
shares available for the segment.

A 5 percent discount has been offered to retail investors
who often take their cue from institutions and were expected to
place heavy orders on the final day on Thursday.

A dominant position in a country that is heavily reliant on
coal-fired power and a valuation considered attractive relative
to peers has made Coal India a near must-own for investors
seeking broad exposure to an economy growing at 8.5 percent.

Still, risks exist, including a Maoist insurgency in key
mining areas, as well as environmental challenges to new mining
projects in the country.

Coal India’s prices are about 60 percent lower than
international prices, in part because of comparatively low
quality coal.

Take a look on Coal India IPO: [ID:nSGE69C09B]

Graphic on Coal India:

Graphic on company vs rivals:

Graphic on Asia’s top IPOs:

The IPO is on track to surpass Reliance Power’s (RPOL.BO: )
$3 billion listing in 2008 as India’s largest new issue, and
comes to market amid a flurry of big deals in Asia.

Coal India, whose shares will begin trading on Nov. 4,
expects profits to rise by a quarter this fiscal year, driven
by demand for electricity in India, three-quarters of which is
fuelled 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 (601088.SS: )(1088.HK: ) trades at 16
times trailing earnings, while smaller Indonesian peer Adaro
Energy (ADRO.JK: ) has a ratio of 20 times. U.S. miner Peabody
Energy (BTU.N: ) trades at 25 times earnings.

Morgan Stanley (MS.N: ) (Read more about the money market today. ), Citigroup (C.N: ), Kotak Mahindra
Capital (KTKM.BO: ), Enam Securities, Deutsche Bank (DBKGn.DE: )
and Bank of America-Merrill Lynch (BAC.N: ) are managers on the
offer. ($1=44.4 rupees)
(Additional reporting by Tony Munroe; Editing by Jui

Coal India retail book covered early on last day