CIL may scrap anchor investor placement

State-run Coal India may scrap allotment under anchor investor plan of its mega initial public offering as the government feels the selection of such investors -- in case their demand for the issue exceeds the limit -- may not be transparent.

The government expects to raise up to Rs 12,000-15,000 crore (Rs 120-150 billion) through Coal India IPO, billed as the country's largest ever.

The empowered group of ministers working on the initial public offering would meet by September-end to decide on the anchor investor issue and on October 12 on the price band of the shares being offered, sources told PTI.

"We believe demand for placement for anchor investors will exceed the quota limit. We may have to be discretionary about whom to choose.

"This is something which the government is not comfortable with as the process of selection of such investors may not be transparent," the sources said.

The government might find it difficult to explain why it selected one anchor investor over another, they said.

CIL chairman Partha S Bhattacharyya when contacted said even if the anchor investor portion was dropped it was unlikely to impact the valuation and interest from investors as all of them could participate through the route of qualified institutional buyers.

"The response from the investors' community was overwhelming in all major cities we visited like London, Los Angeles, Sidney or Singapore," he said.

Anchor investors are those investors who buy shares of the company before the launch of the public issue.

The concept of anchor investors was approved by Securities and Exchange Board of India last year.

This class of investors, who cannot be a promoter of the issuer company, can be allocated as much as 30 per cent of the portion reserved for qualified institutional buyers.

Such investors must bid for at least Rs 10 crore (Rs 100 million) worth of shares Placement of anchor investors cannot not be done on a pro-rata basis, the standard norm for other class of investors including QIB.

Coal India has earlier said that the offer of 63 crore (630 million) shares or 10 per cent government stake would open on October 18.