The price band for Coal India’s initial public offering (IPO) will be between Rs 225 and Rs 245 apiece, coal minister, Sriprakash Jaiswal said on Tuesday.The company will offer 5% discount to the issue price to its employees and retail investors.
The government will put on block 631.64 million shares, of which 63.16 million shares will be reserved for employees. At the higher end of the price band, the company will mop around Rs 15,500 crore, making it the largest ever IPO in the Indian capital market history. So far, the biggest IPO to hit the Indian capital market is Reliance Power, which raised Rs 11,563 crore in January 2008.
The IPO will be open between October 18 and October 21. It will close a day earlier for the qualified institutional buyers (QIBs).
At this price band, the issue price is at a discount to its global peers. The company price-to-earnings multiple based on its FY10 EPS works to 15.73 times at the upper end of the price band, while it is 17.65 for China Shenhua, and 31 for Peabody Energy, USA’s leading coal producer, based on its December 2009 earnings. On listing, Coal India could become the second most valuable coal producing company with a market capitalisation of $35 billion compared with $84.7 billion for China Shenhua, as per Bloomberg data.
The issue comprises 10% of the post-offer paid-up share capital of the company. About 50% of the issue will be allotted to QIBs on a proportionate basis, 15% to non-institutional bidders or high net worth individuals (HNIs) and the rest to retail individual bidders.
The government may allocate up to 30% of the QIB portion to anchor investors, of which at least a third will be reserved for domestic mutual funds. Citigroup, Deutsche Bank, Bank of America, Enam Securities, Kotak Mahindra and Morgan Stanley will manage the IPO. Three rating agency, Crisil, Icra and CARE, have assigned the highest grade of 5/5 to the IPO, indicating strong fundamentals.
