Aiming to garner over Rs 15,000 crore (Rs 150 billion) through the largest ever public offering in India, the government on Tuesday decided to price Coal India's IPO in the range of Rs 225-245 a share for divesting its 10 per cent stake.
The world's largest coal producer will commence trading on the domestic bourses by November 4.
"Coal India IPO price band has been fixed at Rs 225-245 a share. We expect to raise over Rs 15,000 crore from the issue," Coal Minister Sriprakash Jaiswal told reporters, after a meeting of an Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, to decide the price band.
Reacting to market observers' comments that the price band is low, Coal India Ltd (CIL) Chairman Partha S Bhattacharyya said, "The price band is fair. It is neither too high nor too low. It could help raise anywhere between Rs 13,909 crore (Rs 139.09 billion) and 15,154 crore (Rs 151.54 billion)."
The biggest IPO in India till date is that of Anil Ambani Group company Reliance Power. In January 2008, it raised Rs 11,500 crore (Rs 115 billion).
Coal India will make its debut on the bourses on November 4 and is expected to trade at a premium from the issue price, Bhattacharyya added.
The government, which expects to raise an estimated Rs 40,000 crore (Rs 400 billion) through divestment in PSUs in the current fiscal, had postponed share sale programmes of companies like Hindustan Copper, SAIL and MOIL, planned in the current fiscal, in view of CIL's mega offering.
"What Department of Disinvestment feels is that the Coal India IPO will be the frontrunner for all the subsequent issues. The price band has been fixed after taking into account many such factors," Bhattacharyya added.
Coal India is offering 63.16 crore (Rs 631.6 million) shares (10 per cent of government's stake), with a face value of Rs 10 each.
Of the total issue size, 10 per cent has been earmarked for CIL's nearly 400,000 employees. Out of the remaining, 35 per cent for retail investors, 15 per cent for HNIs and the rest for institutional investors has been reserved.
The government owns 100 per cent stake in CIL.
"There will be 5 per cent discount on the issue price for our employees and the retail investors," Bhattacharyya added.
Coal India, which sits on estimated 64 billion tonnes reserves, sells its coal at a 50 per cent cheaper rates than the prevailing global prices.
"By 2017, our ambitious washery project (to reduce ash content of the coal) will go onstream. It will help us in enhancing our margins (by increasing coal prices)," the Chairman said.
The company had clocked a profit of nearly Rs 10,000 crore (Rs 100 billion) in the last fiscal with Rs 52,000 crore (Rs 520 billion) turnover.
The PSU meets over 80 per cent of the country's coal requirement, mainly for the power sector. It is targeting to produce 461.5 million tonnes of coal this fiscal as against about 431 MT in the last fiscal.
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