UPDATE 3-Solid demand seen as Coal India $3.5 bln IPO opens
reuters.com
Mon Oct 18, 2010 9:20am EDT
* IPO expected to be heavily oversubscribed
* Offer 0.34 times covered on first day - exchange data
* Closes Wednesday for funds, Thursday for retail investors
* Other big Asia IPOs including AIA, GLP also popular
* Big India IPOs often see order rush on final day
(Adds end-of-day bid details in paragraph 4)
By Prashant Mehra
MUMBAI, Oct 18 (Reuters) - State-run Coal India launched its $3.5 billion share sale on Monday, with its lower-than-expected pricing and exposure to India's booming electricity demand expected to draw solid investor interest to the country's largest-ever IPO.
Global investors in search of higher returns have been pouring money into emerging markets such as India in recent months. The Coal India offering is expected to draw billions of dollars in overseas demand that will add to upward pressure on the rupee INR=.
"We will find a surge in applications tomorrow onwards from institutions and high net worth investors," said Arun Kejriwal, director at Mumbai-based research firm KRIS, who expects the offer to be more than 10 times covered.
Stock exchange data showed that at the end of the first day, bids had been received for a third of the more than 631.6 million shares being sold in the IPO.
If priced at the top of its 225-245 rupee price range, Coal India would have a market value of $35 billion, ranking it seventh among listed Indian firms.
It would surpass Reliance Power's (RPOL.BO) $3 billion listing in 2008 as India's largest new issue.
A Reuters poll of fund managers last week had found strong interest in the offer near an estimated price of around 250 rupees a share, given the miner's dominant market position in an economy growing at 8.5 percent and attractive valuations. [ID:nSGE69B0FQ]
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DIVESTMENT PUSH
Asia has been leading the way on global IPOs this year, raising more money than the rest of the world combined.
The Coal India offer opened on the same day that sources said American International Group Inc (AIG.N) was closing the institutional order books for its $15 billion Hong Kong listing of AIA Group two days early due to heavy demand. [ID:nSGE69H02W]
Also on Monday, shares in Singapore's Global Logistic Properties GLPL.SI rose as much as 12 percent in the debut for the country's second-largest IPO, which could raise as much as $3 billion. [ID:nSGE69H00F]
The Indian government is selling a 10 percent stake in the world's largest coal miner as part of India's broader effort to divest stakes in roughly 60 companies in the next few years.
Large IPOs in India typically see the heaviest subscription towards the close of the offering. Coal India's IPO closes on Wednesday for institutions and Thursday for retail investors.
Brokerages have estimated that Coal India could see upside of roughly 30 percent from its IPO valuation range, and said Coal India deserves a premium to global peers due to lower earnings volatility, a large undeveloped resource base and potential to increase prices.
"After a long time, there is an IPO which has left something on the table for the investors," said Om Ahuja, head of private wealth management at Emkay Global.
Demand for electricity in India, three-quarters of which is fueled by coal, is forecast to grow 11 percent a year.
Coal India, based in the eastern city of Kolkata, produced 431 million tonnes in 2009/10 and accounts for nearly 80 percent of coal output in Asia's third-largest economy.
At the top of its price range Coal India would be valued at 15.7 times trailing earnings.
It made a net profit of 98.3 billion rupees ($2.2 billion) in 2010 fiscal year on revenue of 525.9 billion rupees. It expects profits to rise by a quarter this fiscal year.
China's Shenhua Energy (601088.SS)(1088.HK) trades at 16 times trailing earnings, while smaller Indonesian peer Adaro Energy (ADRO.JK) has a ratio of 20 times. U.S. miner Peabody Energy (BTU.N) trades at 25 times earnings.
Morgan Stanley (MS.N), Citigroup (C.N), Kotak Mahindra Capital (KTKM.BO), Enam Securities, Deutsche Bank (DBKGn.DE) and Bank of America-Merrill Lynch (BAC.N) are managers on the offer. (Additional reporting by Sumeet Chatterjee and Ami Shah; Editing by Lincoln Feast and Michael Shields) |
