Coal India Raises Maximum $3. 4 Billion in IPO of World s Biggest Producer

Last Updated on Tuesday, 30 November 1999 05:00 Tuesday, 26 October 2010 11:32

Commodities - Commodity News

Coal India Ltd.  s share sale raised the maximum 152 billion rupees ($3. 4 billion) sought for the government after investors ordered 15 times the stock available in the nation s biggest initial public offering.

Coal India attracted bids worth at least $48. 7 billion as an accelerating economy drives energy demand and a surging stock market draws record inflows.  The response is a boost for Prime Minister Manmohan Singh, who s seeking 400 billion rupees from seven planned stock sales by March to rein in the budget deficit.

 Demand is never a problem in India, said Ashutosh Tiwari, an analyst at Equirus Securities Pvt.  in Ahmedabad, who estimates the fair value of Coal India s stock is 299 rupees.  The problem is on the supply side and Coal India will benefit from all this demand.  There are few risks with Coal India. 

At 245 rupees a share, Coal India s price-to-earnings ratio for the year ending March 31 is 13. 7, Tiwari said.  That compares with 17 times for Peabody Energy Corp. , the largest U. S.  coal producer, and 16 times for China Shenhua Energy Co.  in the year ending Dec.  31, he said.

Indian IPOs

Coal India s offer extended Citigroup Inc.  s lead as the number one arranger of equity sales in India this year, according to data compiled by Bloomberg.  Second-ranked Kotak Mahindra Capital Co.  also helped manage the sale with Enam Securities Pvt. , Deutsche Bank AG, Bank of America Corp.  and Morgan Stanley.

Indian companies have announced 121 initial offerings in 2010, four times the number of first-time share sales a year earlier, according to Bloomberg.

Overseas investors have poured 1. 12 trillion rupees into Asia s fourth-biggest equity market this year, lifting the Sensitive Index to near an all-time high.  The 10 percent stake sale in Coal India surpassed the 116 billion rupees raised by billionaire Anil Ambani s Reliance Power Ltd.  in January 2008 as India s biggest IPO.

The government plans to sell shares in seven more companies in the next five months, Disinvestment Secretary Sumit Bose said Oct.  19.  State-run Power Grid Corp.  of India Ltd.  is scheduled to start its follow-on offer on Nov.  9.

Coal Demand

India s coal demand may more than triple in the next two decades to 2 billion metric tons, Coal Minister Jaiswal said on Sept.  24.  The country, which uses coal to produce more than half of its electricity, is building power plants and steel mills to meet demand in the $1. 3 trillion economy, which expanded at the fastest pace in 2 1/2 years in the three months ended June 30.

India produces 530 million tons of coal a year and imports about 67 million tons, Jaiswal said at the time.  Coal India has proven reserves of 52. 55 billion tons, of which 21. 75 billion is extractable, the company s share-sale document shows.

Coal India and its units had a net income of 25. 2 billion rupees in the three months ended June 30, according to the IPO prospectus.  Profit in the year ended March 31 more than doubled to 98. 3 billion rupees and sales rose 15 percent to 446. 2 billion rupees.

China Shenhua Energy, a unit of the nation s largest coal producer, has a market value of about $90 billion and Peabody Energy, $14 billion, according to data compiled by Bloomberg.

Courtesy: Bloom Berg