The centre’s first major disinvestment for Financial Year 2023-24 is a success. The Rs 4,160-crore offer for sale (OFS) in Coal India garnered bids worth Rs 6,500 crore on Thursday from institutional investors, or 1.6 times the share on offer.
As per data provided by the stock exchanges, most bids came at around Rs 226 per share, slightly higher than the Rs 225 floor price set by the government for the OFS. Shares of Coal India declined by 4.4 per cent to end at Rs 231 on the BSE. In the past one year, shares of the state-owned miner have traded at a weighted average price of Rs 220.
The names of the investors who placed bids in the OFS couldn’t be ascertained. Investment banking sources said a clutch of domestic mutual funds and state-owned institutions have subscribed to the shares.
Axis Bank, ICICI Securities, JM Financial, Kotak Mahindra Bank and SBI Caps are the investment banks handling the share sale.
Shares worth Rs 415 crore reserved for retail investors will be auctioned on Friday. The oversubscription from institutional investors will help make up for the demand shortfall in the retail category, if any.
Analysts believe the correction in shares of Coal India due to the OFS could be a good buying opportunity. The company revised upwards on Wednesday the price of non-coking coal, which is expected to add Rs 2,700 crore to FY24 revenues.
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“We have increased our revenue estimates by 2 per cent to factor in the incremental revenues due to the price hike. We have increased our EBITDA/APAT estimate by 2.4 per cent/2.5 per cent to factor in the price hike benefit, which would be partially offset by the lower e-auction premiums. Coal India trades at EV/EBITDA of 3.9 times FY24E. We reiterate our BUY rating on the stock with a revised target price of Rs 290 (5x EV/EBITDA). We believe the company is well placed to capitalise on the growth opportunity ahead,” said a note by Motilal Oswal.
Following the OFS, the government’s stake in Coal India—which is currently valued at Rs 1.43 trillion—will drop 3 per cent to 63.13 per cent.
The last major disinvestment in Coal India was in 2018 when the centre had targeted to offload shares worth Rs 14,800 crore through the OFS route. However, the OFS had garnered demand for only a third of the targeted amount. So far this financial year, the government has garnered less than Rs 50 crore as disinvestment proceeds as per Dipam’s website.
This year’s budget has pegged the FY23 disinvestment target at Rs 51,000 crore. In the previous financial year, the government had mopped up close to Rs 35,000 crore thanks largely to the Rs 20,516 crore it raised through LIC’s IPO.
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