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India's biggest asset sale to raise US$3.6b lures investors

[NEW DELHI] India's biggest asset sale to help raise at least US$3.6 billion selling shares of Coal India Ltd got a boost as the offer was fully subscribed by investors.

Bidding reached 662 million shares for the 631.6 million on offer, or 10 per cent of the government's stake that included the greenshoe option, according to data provided by BSE Ltd.

The government had set a minimum price of 358 rupees a share for the planned sale of 5 per cent of its stake, with an option to sell an additional 5 per cent.

The success at Friday's sale may provide a fillip to the government's flagging program to raise money from such offerings. Falling oil prices and proceeds from the sale will help Prime Minister Narendra Modi meet his target to cut a budget shortfall to the lowest in seven years.

"It's a monopoly business and will benefit from the Modi government's focus on the power sector," said Paras Bothra, vice president of equity research at Ashika Stock Broking Ltd in Mumbai. "It's a good bet for the institutional investors."

The 10 per cent sale in Coal India will potentially make it the nation's biggest public offering, according to data compiled by Bloomberg.

In the current financial year ending March 31, counting out today's Coal India auction, the government had managed to meet only 3 per cent of its goal of raising 584 billion-rupee (US$9.4 billion) from its asset sale program. It has missed its targets every year since fiscal 2011.

Prior to the sale, the government owned 89.65 per cent in the monopoly miner. Individual investors, who got a 5 per cent discount to the minimum bid price, bid for less than half of the shares offered to them.

"Retail investors may not have the patience to hold the stock for three to five years," Mr Bothra said. "In a bull market there are many options in the mid-cap space for them to invest."

Coal India shares fell 3.8 per cent to 360.85 rupees in Mumbai today. The stock has declined 5.9 per cent this month, compared with a 6.1 per cent gain in the benchmark S&P BSE Sensex, the world's best performer this year in dollar terms.

Bank of America Corp, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, JM Financial Ltd, Kotak Mahindra Bank Ltd and SBI Capital Markets Ltd were managers to the sale.