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Coal India's Share Sale Draws $314 Million of Bids in First Hour
2010-10-18 06:49:23.986 GMT
By Rakteem Katakey and Ruth David
Oct. 18 (Bloomberg) -- Coal India Ltd., the world's biggest
producer of the fuel, received 13.9 billion rupees ($314
million) of bids at the upper end of the price range in the
first hour of the nation's biggest initial share sale.
Investors bid for 56.74 million, or 9 percent, of the 631.6
million shares on offer as of 11 a.m. in India, according to
data on the National Stock Exchange's website. The state-owned
company's stock is being offered at 225 rupees to 245 rupees
apiece, Coal Minister Sriprakash Jaiswal said Oct. 12. The
government plans to raise as much as 151.5 billion rupees from
the sale.
Sixteen of 19 investors surveyed by Bloomberg News said
they plan to buy shares in the world's largest coal producer.
The sale is the third offering in a state company since April as
the government seeks to cut its budget deficit and fund
infrastructure projects. Steel Authority of India Ltd., Oil &
Natural Gas Corp. and Indian Oil Corp. also plan to sell shares.
"The IPO will easily get subscribed and that is because
the valuation is fair," Samir Arora, founder of hedge fund
Helios Capital Management Pte. in Singapore, said by telephone
today. "That's the biggest attraction. It's a large company and
it's relatively cheap."
Institutional investors in India delay making bids until
the last day of an IPO after the country's market regulator in
May made it mandatory for them to pay 100 percent of the
application money upfront. Almost 90 percent of bids in Standard
Chartered Plc's $540 million India share sale in May came on the
final day.
India's coal imports surged 16 percent in the year ended
March 31 as power plants burned more of the fuel to meet demand
in Asia's second-fastest growing major economy. Coal India will
seek environmental clearances from the government to mine in
densely forested areas in states including Jharkhand and
Chhattisgarh estimated to hold half of its future output.
Government Target
The IPO by Kolkata, West Bengal-based Coal India would
surpass Reliance Power Ltd.'s 116 billion-rupee sale in January
2008 as India's biggest, according to data compiled by
Bloomberg. Reliance Power sold shares at 450 rupees apiece and
investors ordered shares worth as much as $189 billion. The
shares slumped 48 percent from the offer price on their trading
debut on Feb. 11, 2008.
Citigroup Inc., Deutsche Bank AG, Bank of America Corp.,
Enam Securities Pvt., Kotak Mahindra and Morgan Stanley are
managing Coal India's offering. The sale closes on Oct. 21.
The share sale will help the government raise 37.8 percent
of its 400 billion rupee asset-sale target in the year ending
March 31. The South Asian nation has raised 5.2 percent of its
target from selling stakes in two state companies this year.
Coal Demand
Investors are buying shares as India builds power plants
and steel mills to keep pace with an economy that expanded at
the fastest pace in 2 1/2 years in the three months ended June
30. India's coal demand may more than triple in the next two
decades to 2 billion metric tons, Coal Minister Jaiswal said
Sept. 24.
India's Sensitive Index has gained 14 percent this year,
the best performance among the world's 10 largest stock markets.
The Sensex gained about 47 percent in 2007, the most in four
years. In 2008 the gauge fell almost 53 percent, its biggest
decline.
Companies from emerging economies in the Asia-Pacific
region raised over $72 billion in initial sales this year, more
than triple the amount in the same period in 2009, according to
Bloomberg data. Beijing-based Agricultural Bank of China Ltd.
sold $22.1 billion of shares in Shanghai and Hong Kong last
quarter in the world's largest IPO.
Coal Production
The nation produces 530 million tons of coal a year and
imports about 67 million tons annually. Coal India has proven
reserves of 52.55 billion tons, of which 21.75 billion is
extractable, the share-sale document shows.
Coal India may miss its production targets for 2011 and
2012 because of delays in environmental clearances, Chairman
Partha Bhattacharyya said Oct. 13, without giving new estimates.
The company had aimed to produce 460 million tons in 2011
and 486 million tons the next year, Bhattacharya said on May 20.
Environmental approvals to prospect for more reserves take as
long as seven years in India, he said.
The environment and coal ministries are jointly identifying
areas for coal mining designated as "go" and "no-go" areas
to find ways to boost output of the fuel to meet surging demand.
"No-go" areas are locations with medium or heavy density
forests while degraded forests are go-areas, Minister for
Environment and Forests Jairam Ramesh said in June last year.
Ramesh rejected last month Vedanta Resources Plc's planned
bauxite mine and halted in August two hydropower projects.
Maoist insurgents are also a risk. Rebels are active in
seven eastern and central states with 40 billion tons of India's
46 billion tons of proven coal reserves, according to CLSA Asia-
Pacific Markets estimates.
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>
--Editors: Amit Prakash, John Viljoen.
To contact the reporters on this story:
Rakteem Katakey in New Delhi at +91-11-4179-2013 or
rkatakey@bloomberg.net;
Ruth David in Mumbai at +91-22-6633-9017 or
rdavid9@bloomberg.net.
To contact the editor responsible for this story:
Amit Prakash at +65-6212-1167 or aprakash1@bloomberg.net.
