UPDATE 1-Coal India IPO raises nearly $3.5 bln
reuters.com
Mon Oct 25, 2010 9:30am EDT
* Ministers price IPO at 245 rupees/share
* Values Coal India at discount to global peers
* IPO to be largest ever in India
* Coal India shares to debut on Nov. 4.
(Adds details, byline)
By Devidutta Tripathy
NEW DELHI, Oct 25 (Reuters) - The Indian government on Monday priced state-run Coal India's IPO at 245 rupees, the country's coal minister said, buoyed by the strong response from foreign investors looking at broader exposure to the Indian economy.
The government will raise close to $3.5 billion from the sale of a 10 percent stake in the world's largest coal miner. Coal India's IPO will surpass Reliance Power's (RPOL.BO) $3 billion listing in 2008 as India's largest new issue, and comes to market amid a flurry of big deals in Asia.
At this price, Kolkata-based Coal India, which accounts for nearly 80 percent of coal output in Asia's third-largest economy, would be worth $35 billion, ranking it seventh among India's listed firms.
The IPO was more than 15 times subscribed by close on Oct 21, with most bids at the top end.
The institutional order book was heavily oversubscribed, with orders worth about $27 billion from foreign investors. Additionally, record flows from overseas into Indian stocks this year recently pushed the rupee INR=IN to a 25-month high.
Coal India shares will begin trading on Nov. 4, with allotments likely to be finalised by Nov 1.
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DIVESTMENT PIPELINE
India is selling stakes in some 60 firms over the next few years, and the strong appetite for Coal India contrasts with sluggish demand for some recent offerings and adds pressure on New Delhi to price future deals attractively.
"This is the right price for the company. Valuation-wise, it is not expensive," said Deven Choksey, Managing Director at K.R. Choksey Shares and Securities. "The government seems to have learnt their lesson. If you do right picing, there is appetite for stocks."
Coal India's offer will be followed by a $1.9 billion share sale in state-run Power Grid Corp (PGRD.BO) that opens on Nov 9 and a $270 million IPO in state miner Manganese Ore India Ltd by the last week of November.
Demand for coal is forecast to grow 11 percent a year in India, which aims to halve its peak-hour power deficit of nearly 14 percent over the next two years and triple its generation capacity over the next decade.
Coal India's dominant position in a country that is heavily reliant on coal-fired power and an attractive valuation relative to peers has made it a near must-own for investors.
Local and foreign brokerages estimated the stock could see an upside of roughly 30 percent from its IPO valuation range, given its lower earnings volatility, a large undeveloped resource base and potential to increase prices.
Still, risks do exist, including a Maoist insurgency in key mining areas and environmental challenges to new mining projects in India. The company also prices coal about 60 percent lower than international prices, in part because of comparatively low quality coal.
To counter this, the company plans to focus on expanding margins by selling more high quality, higher priced washed coal and is currently evaluating proposals to buy stakes in coal firms in the U.S., Australia and Indonesia.
The miner expects profits to rise by a quarter this fiscal year, helped by rising demand. It reported earnings per share of 15.60 rupees for the fiscal year ended March 2010 and would be valued at 15.7 times trailing earnings at the offer price.
China's Shenhua Energy (1088.HK), the Indian miner's closest rival, trades at 16 times 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.
Individual investors and Coal India staff will get a five percent discount on the offer price. 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) were the managers on the offer.
($1= 44.4rupees) (Writing by Prashant Mehra; Editing by Jui Chakravorty) |
