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Coal India Sale Bids Top Latvia, Iceland GDP on Growth (Update1)
2010-10-22 05:48:41.299 GMT
(Updates with AIA offering in the seventh paragraph.)
By Rakteem Katakey
Oct. 22 (Bloomberg) -- Coal India Ltd.'s share sale
attracted bids that exceeded the combined gross domestic product
of Latvia and Iceland as investors bet the mining company will
benefit from energy demand in the second-most populous nation.
The world's biggest coal producer drew orders worth at
least $48.7 billion after the 631.6 million shares on offer were
subscribed 15 times in a sale that ended yesterday, data on the
website of the National Stock Exchange showed. The government is
selling a 10 percent stake at 225 rupees to 245 rupees a share
in the initial public offering.
Investors expect the Kolkata-based company will gain as
India, which uses coal to produce more than half of its
electricity, increases generation capacity to sustain economic
growth. The government aims to raise as much as 151.5 billion
rupees ($3.4 billion) in the country's biggest share sale,
topping the 116 billion rupees raised by billionaire Anil
Ambani's Reliance Power Ltd. in January 2008.
"Coal India's near monopoly in India and cheap coal
ensures there is potential upside to the stock," said Juergen
Maier, who helps manage the equivalent $1.3 billion of assets,
including Indian stocks, at Raiffeisen Capital Management in
Vienna. "There's a lot of money coming into India. The India
story sounds very good."
Overseas investors have bought a record 1.09 trillion
rupees of Indian equities this year, pushing the benchmark
Sensitive Index to a near record this month.
AIA Share Sale
Emerging-market equity funds have attracted more than $60
billion of net inflows this year as central banks in Europe and
Japan stepped up efforts to reduce borrowing costs, spurring
demand for higher-yielding assets, according to research firm
EPFR Global based in Cambridge, Massachusetts.
Investors ordered more than HK$1 trillion ($129 billion)
worth of AIA Group Ltd. shares in Hong Kong's biggest IPO, two
people familiar with the matter said today.
Coal India may raise the maximum amount from the offer,
according to three people with direct knowledge of the matter.
Sale arrangers will advise the government to sell shares in the
state-run company at 245 rupees, the top end of the offered
range, the people said yesterday, declining to be identified
because the matter is confidential.
"Shouldn't the government wonder if the offering was not
priced properly and too much money was left on the table?" said
Seth Freeman, chief executive officer of San Francisco-based EM
Capital Management LLC, which focuses on emerging markets
including India, China and Vietnam.
A group of ministers will decide on the price on Oct. 25,
one of the people said.
Ensuring Euphoria
"The government could've priced Coal India a little
higher," said Arun Kejriwal, the Mumbai-based director of
Kejriwal Research & Investment Services Pvt. "By reasonably
pricing the Coal India issue, the government is ensuring demand
and euphoria for the other issues coming up."
The government plans to sell stakes in seven more companies
in the next five months, Disinvestment Secretary Sumit Bose said
Oct. 19. State-run Power Grid Corp. of India Ltd. will start its
follow-on offering from Nov. 9.
At the top of the price range, Coal India would be valued
at about $34 billion. China Shenhua Energy Co., a unit of the
nation's largest coal producer, had a market value of $89
billion and Peabody Energy Corp., the largest U.S. coal
producer, $14 billion, according to data compiled by Bloomberg.
Upfront Money
The value of the bids that Coal India received is 26
percent of what Reliance Power got following a rule change by
India's capital markets regulator in May, requiring investors to
put up their entire application money upfront. In contrast,
institutional investors put in 10 percent as margin money during
the Reliance Power IPO, which attracted bids worth $189 billion
for shares sold at 450 rupees apiece.
"This is real money coming in to the sale," said Kishor
Ostwal, managing director of CNI Research (India) Ltd., a
publicly traded equities research provider in Mumbai. "Foreign
investors are very bullish on India's growth story."
Reliance Power declined 17 percent on its trading debut on
Feb. 11, 2008, as a global sell-off in equities dried up
appetite for new shares. The benchmark Sensex fell 53 percent in
2008, the biggest annual decline since at least 1980.
The index has climbed 16 percent so far this year and is
the best performer among the world's 10 largest stock markets.
Enam Securities Pvt. is managing the Coal India sale along
with Citigroup Inc., Deutsche Bank AG, Bank of America Corp.,
Kotak Mahindra Capital Co. and Morgan Stanley.
Coal Demand
India's coal demand may more than triple in the next two
decades to 2 billion metric tons, Coal Minister Sriprakash
Jaiswal said on Sept. 24. The country 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.
India's government has pledged to provide electricity
nationwide by 2012, which would require an installed generation
capacity of 200 gigawatts to sustain economic growth of 8
percent, the power ministry said on its website. The country had
165 gigawatts as of Aug. 31, according to the Central
Electricity Authority.
Latvia had a GDP of $26 billion, more than double Iceland's
$12 billion, according to data compiled by Bloomberg.
For Related News and Information:
Top energy stories: ETOP <GO>
Energy stories from India: TNI INDIA NRG BN <GO>
Top news from India: TOP IN <GO>
Today's most active securities: MOST <GO>
Initial share sales: IPO <GO>
Coal India's financial data: COAL IN <Equity> FA <GO>
Environmental markets: GREE <GO>
Most-read India news: MNI INDIA 1W <GO>
--With assistance from Ruth David in Mumbai. Editors: John
Chacko, Amit Prakash.
To contact the reporter on this story:
Rakteem Katakey in New Delhi at +91-11-4179-2013 or
rkatakey@bloomberg.net
To contact the editor responsible for this story:
Amit Prakash at +65-6212-1167 or aprakash1@bloomberg.net
