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Coal India Surges 40% on Debut After Record Share Sale (Update2)
2010-11-04 11:19:39.331 GMT
(Updates with comment from minister in the 10th
paragraph.)
By Rakteem Katakey and Rajesh Kumar Singh
Nov. 4 (Bloomberg) -- Coal India Ltd. surged 40 percent on
its first trading day to become the world's second-most valuable
coal miner after investors bid for 15 times the shares sold in
the country's largest initial public offering.
The stock climbed to 342.55 rupees in Mumbai trading,
valuing the company at $49 billion. The benchmark Sensitive
Index gained 2.1 percent to a record. Prime Minister Manmohan
Singh's government raised 152 billion rupees ($3.4 billion) last
month by selling a 10 percent stake in the world's largest coal
producer at 245 rupees a share.
Investors bid for at least $48.7 billion worth of shares
after Coal India offered stock at a discount to global peers and
India's economy grew at the fastest pace in more than two years
in the second quarter, spurring energy demand. Asian stocks and
commodities rallied following steps by the U.S. Federal Reserve
to boost the world's largest economy.
"There's a lot of money coming into commodities and
emerging markets after the Fed action yesterday," said Niraj
Shah, a Mumbai-based analyst at Fortune Equity Brokers Ltd., who
had a price target of 318 rupees for the miner. "Coal India is
a near-monopoly supplier in India and energy demand will only
continue to increase. I wouldn't be surprised if the share hits
400 rupees."
Asian stocks climbed today, pushing the MSCI Asia Pacific
Index to a more than two-year high, and commodities gained after
the Fed said yesterday it would expand asset buying by $600
billion.
Unexpected Gains
"We had expected some gains on listing and had built that
into the price," Chairman Partha Bhattacharyya said in an
interview with Bloomberg-UTV today. "But we didn't expect this
much gains."
Indian companies raised a record 350 billion rupees in IPOs
this year, according to data compiled by Bloomberg. Coal India
helped cement Kotak Mahindra Capital Co.'s ranking as the top
arranger of initial share sales in India. Bank of America Corp.,
Citigroup Inc., Deutsche Bank AG and Enam Securities Pvt. were
the other managers for Coal India's sale.
The company was initiated at "outperform" by Credit
Suisse Group AG, which cited the country's chronic coal
shortages and the company's "superior" earnings. The brokerage
set its share-price target at 350 rupees, according to a report
by Mumbai-based Neelkanth Mishra and Riya Bhattacharya.
Debt Rates
Macquarie Group Ltd. analysts Rakesh Arora and Samidha
Gehlot in Mumbai initiated coverage at "outperform" with a
target of 338 rupees.
"We always thought 300 rupees was a fair price," Coal
Minister Sriprakash Jaiswal said in New Delhi today. "But we
kept the range reasonable to encourage more participation."
Investors pulled money from banks to buy the Kolkata-based
company's shares, causing rates for three-month corporate debt
to almost double this year.
The response was a boost for the government's plan to sell
shares in seven more companies in the next five months as it
aims to raise about 400 billion rupees to help cut the budget
deficit and fund infrastructure projects. A follow-on offer in
Power Grid Corp. of India Ltd. is due to start Nov. 9.
"If India is growing, you will see these records getting
broken as IPOs get bigger and bigger," said Vallabh Bhansali,
chairman of Enam Securities.
Indian companies have announced 121 initial offerings in
2010, four times the number a year earlier, according to
Bloomberg. First-time share sellers in the South Asian nation
this year, excluding Coal India, gained an average 12 percent on
listing, the data show.
Overseas Inflows
The benchmark Sensitive Index has advanced 20 percent this
year, fuelled by foreign investor inflows. Overseas investors
have poured a record 1.2 trillion rupees into Asia's fourth-
biggest equity market this year.
At 245 rupees a share, Coal India's price-to-earnings ratio
for the year ending March 31 was 13.7, according to Ashutosh
Tiwari, an analyst at Equirus Securities Pvt. in Ahmedabad. 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.
Coal India and its units, which account for 82 percent of
the nation's production of the fuel, posted 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.
Peabody, Shenhua
China Shenhua Energy, a unit of the nation's largest coal
producer, has a market value of about $87 billion and Peabody
Energy $15 billion, according to data compiled by Bloomberg.
India's coal demand may more than triple in the next two
decades to 2 billion metric tons, Minister 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 8.8 percent
in the three months ended June 30, the fastest pace in 2 1/2
years.
The country produces 530 million tons of coal a year and
imports about 67 million tons, Jaiswal said then. Coal India has
proven reserves of 52.55 billion tons, of which 21.75 billion is
extractable, the company's share-sale document shows.
The environment and coal ministries are jointly identifying
areas to find ways to boost coal production in Asia's second
fastest-growing economy. Coal India has to seek environmental
approvals for mining in densely forested areas that are
estimated to hold half of its future output.
India's government has pledged to provide electricity
nationwide by 2012 and needs to increase installed generation
capacity to 200,000 megawatts to sustain economic growth,
according to the power ministry. Coal is used to generate more
than half of the current capacity of 164,836 megawatts.
For Related News and Information:
Top finance stories: FTOP <GO>
India's economic snapshot: ESNP IN <GO>
Best-performing Sensex stocks: SENSEX <INDEX> MRR1 <GO>
Most-read people news: MNI WNEWS <GO>
IPO data: IPO <GO>
--With assistance from Ruchika Tulshyan, Hemal Savai and Ruth
David in Mumbai. Editors: John Chacko, Abhay Singh
To contact the reporters on this story:
Rakteem Katakey in New Delhi at +91-11-4179-2013 or
rkatakey@bloomberg.com;
Rajesh Kumar Singh in New Delhi at +91-11-4179-2007 or
rsingh133@bloomberg.com
To contact the editor responsible for this story:
Amit Prakash at +65-6212-1167 or aprakash1@bloomberg.net
