The pricing of the world’s biggest coal producer’s IPO appears to be competitive, say analysts
Yesterday (http://www.moneylife.in/article/8/9954.html) we had reported on how Coal India Ltd (CIL) is planning to come out with what could eventually be India's largest Initial Public Offering (IPO). The government plans to raise around Rs15,000 crore from this offer. It is diluting 10% stake in CIL through the public offer. At present, the Centre owns a 100% stake in the company.
"This IPO would break all previous records and we intend to increase the public participation in the company," said coal minister Sriprakash Jaiswal. CIL's IPO will surpass Reliance Power's IPO, which had raised Rs11,500 crore.
The offer comprises a net offer to the public of 568,472,796 shares and 63,163,644 shares, which are reserved for the company's employees.
According to market experts CIL's IPO is likely to fetch more investment from foreign institutional investors (FIIs) as the price is fairly fixed.
"The Coal India IPO has been priced attractively. This will ensure inflow of money into the Indian market, especially from FIIs. The IPO will act as a catalyst to bring more FII investment into the market," ICICI Prudential Asset Management Company's deputy managing director Nilesh Shah said on the sidelines of an event.
The issue will also bring back retail investors, he said.
"Similar to the Maruti Suzuki IPO, the Coal India IPO will also attract more investors to India. The Indian market will be driven by flows from FIIs in the coming years," Mr Shah said.
"The IPO is reasonably priced. Investors would like to have exposure to the company's unique business as it enjoys a monopoly status today," Bajaj Allianz's Chief Investment Officer (CIO) Sashi Krishnan said.
Birla Sun Life Insurance Company's Chief Investment Officer Vikram Kotak also said that the offer is "not costly" and the market is seeing huge investments coming in.
All the three companies are planning to invest in the IPO.
"We have not yet finalised our plans for investment but we are looking at the possibility," Mr Krishnan said.
Talking about the production loss due to the Naxalite movement, Partha Bhattacharyya, chairman, CIL, said, "Even though we are facing the Naxalite problems, particularly in Jharkhand, we have not slowed down our production, but it is hampering the transportation of coal."
"We are facing environmental hurdles for a long time; however, we have managed to maintain our production target. Once the projects are approved by the ministry of environment & forests, production will increase faster," said Mr Bhattacharyya.
The company is also planning to acquire two overseas assets with an investment of $1.2 billion, added the chairman.
In India, there is a 2.5% gap in demand and supply and CIL expects 20% annual growth in imports, said Mr Bhattacharyya. CIL also expects about 15% growth in sales and 25% in net profit for FY11 by increasing sale of high-quality products, said AK Sinha, director of finance, CIL.
The state-owned company is also planning to increase its coal-washing capacity to increase the quality of coal, added Mr Bhattacharyya. In India, about 75% of power is generated from coal and demand is expected to grow by 11% every year, said Mr Bhattacharyya.
This apart, the Adani Group is in talks with CIL to form a partnership for developing its Australian mines. Adani recently bought the mines for Rs12,600 crore.
"Talks have opened up between an Adani Group firm and Coal India Ltd. The Adani Group is seeking to rope in CIL for development of coal assets it recently bought in Australia for Rs12,600 crore. There could be an equity partnership as well," a market source privy to the development said.
Coal India is the largest coal-producing company in the world, based on the company's raw coal production of 431.26 million tonnes (MT) in fiscal 2010. As of 31 March 2010, the company operated 471 mines in 21 major coalfields across eight states in India, including 163 open cast mines, 273 underground mines and 35 mixed mines, which include both open cast and underground mines.
Educomp Solutions, through its Singapore subsidiary, AsknLearn has signed an agreement with China Distance Education Holdings (CDEL) to license and distribute its products in that country. No financial details were provided.
According to the agreement, CDEL will have exclusive rights to license and distribute Educomp's Smart Class, Edulearn and Wizlearn products in China excluding Hong Kong, Macau and Taiwan, the company said in a regulatory filing.
On Wednesday, Educomp shares ended 0.5% up at Rs634 on the Bombay Stock Exchange, while the benchmark Sensex increased 2.4% to 20,687 points.
Moser Baer India Ltd said it has signed a memorandum of understanding (MoU) with Indian Institute of Technology (IIT) Kanpur to start a research and development (R&D) program in advanced clean energy technologies.
The research will be conducted from IIT Kanpur and Moser Baer will providing funding of Rs25 lakh annually.
On Wednesday, Moser Baer shares rose 0.4% to Rs72 on the Bombay Stock Exchange, while the benchmark Sensex increased 2.4% to 20,687 points.