CIL IPO a runaway hit, generates record demand

.  As against the public offer of 631,636,440 equity shares of face value of Rs 10 each – with a price band of Rs 225-245 – CIL has received bids for more than USD 53 billion worth of equity shares (as against issue size of USD 3.5 billion) by 1600 hours this day with major contributions from qualified institutional buyers (QIBs) followed by non-institutional investors (NIIs) and retail investors.

Retail investors have made a beeline for Coal India IPO, which was subscribed almost 14 times and with the retail segment getting fully subscribed by 1.10 times early this day (being the last day), led to a total of over subscription of 15 times.

Foreign institutional investors (FIIs) put in bids for a staggering 493.38 crore shares, compared with 28.42 crore shares reserved for the qualified institutional bidders (QIB) category as a whole, data on NSE website showed.

For the reserved portion of QIBs (which closed on the previous day and has been subscribed 24.7 times), foreign institutional investors put in bids for USD 27.5 billion worth of equity shares followed by domestic financial institutions and mutual funds with US$10 billion and US$1.4 billion, respectively. (USD 1 = Rs 44) 

Till Wednesday, the reserved portion of non-institutional investors was subscribed 2.89 times. Simply put, institutional investors have made an all out pitch for the Coal India IPO leading to it getting the highest-ever demand received by an Indian issue to date.

QIB generated demand for CIL IPO was at Rs 1,73,398 crore with 100 per cent margin as compared with Rs 1,88,923 crore with 10 per cent margin for Reliance Power IPO –launched in 2008 – where QIBs’ portion had subscribed 30.68 times.

Market analysts aver that even at the upper end of the price band, the market should treat CIL as utility player than commodity producer and whose fair value ranged between Rs 294 to Rs 316 on DCF (discounted cash flow) valuation.  This also means that investors those who have put in bids for (short term) listing gains too have a lot to gain from this Initial Publi  Offers.

All issue proceeds will be received by the selling shareholder (GoI), which stake will be 89.99 per cent post the issue. The offer shall constitute 10 per cent of the post offer paid-up equity share capital of company.

Book running lead mangers to the issue are Citigroup Global Markets, Deutsche Equities (India), DSP Merrill Lynch, ENAM Securities, Kotak Mahindra Capital and Morgan Stanley India.

Demand shows investor confidence for premier PSUs, says Pranab
Finance Minister Pranab Mukherjee said the huge demand for Coal India’s initial share sale offer shows investor confidence in premier Indian companies.

“This (Coal India) is a premier organisation. It speaks how much confidence they enjoy — public sector undertakings and private sector firms,” Mukherjee told reporters.
Coal Minister Sriprakash Jaiswal also said that the kind of response CIL has received shows confidence of investors in the India growth story.

“Huge participation from foreign institutional investors as well as retail buyers shows high confidence in the world’s largest coal producer (CIL),” Jaiswal told PTI. Jaiswal further said the mega CIL IPO will set the benchmark for forthcoming public issue of other PSUs.
The public offerings of three bluechip navratna companies — SAIL, IndianOil and ONGC — is expected to hit Dalal Street in the first quarter of next year.