Offering a near 5 per cent discount to investors, the Centre on Thursday fixed the floor price at Rs 358 a piece for the 10 per cent stake sale in Coal India. At this value, the exchequer is likely to earn about Rs 22,600 crore, turning into the biggest such stake sale ever.
“The President of India, acting through and represented by the ministry of coal, Government of India is the promoter of Coal India Limited has informed that the floor price for the sale in terms shall be Rs 358 per equity share,” the company said in a filing to the stock exchanges.
This translates into a 4.57 per cent discount on Thursday’s closing price of CIL scrip at Rs 375.15 apiece. However, following the news of disinvestment, CIL’s share price saw a sharp drop of Rs 8.90 or 2.32 per cent from Wednesday’s close of Rs 384.05 apiece.
“The valuation is quite attractive. Given the inherent strength of the firm and its vast reserves, the stock looks attractively priced. Once the offer-for-sale (OFS) is completed, there will be further upside to this as the stock is currently under-priced,” said Vaibhav Agrawal, vice president, research, Angel Broking.
The government is selling 31.58 crore shares, or five per cent stake, in a public offer with an option to sell another 5 per cent through OFS or auction route. For retail investors, 12.63 crore or 20 per cent of the shares on offer has been reserved along with a further five per cent discount on the floor price.
“We expect good participation from retail investors as it translates into almost a 10 per cent discount,” said a senior government official.
The Centre is banking heavily on the CIL disinvestment, which would be the country’s biggest share sale ever and would help make up for more than half of the disinvestment target of Rs 43,425 crore for current fiscal.
This would exceed the existing record amount of over Rs 15,000 crore raised through a public offer, which was also by CIL when it had entered the market with its IPO in 2010. At the time, CIL shares were sold at a price of Rs 245 in the IPO, which was oversubscribed by more than 15 times.
With the mega share sale scheduled for Friday, market regulator Sebi has also put its surveillance system on high alert to prevent any manipulative activities in the market.
Previously, the Centre has just raised Rs 1,715 crore from the five per cent disinvestment in Steel Authority of India Ltd earlier this fiscal.