CIL’s IPO assigned top grading by Crisil

Rating agency Crisil has assigned a top 5/5 (five on five) IPO grade to the proposed initial public offering of public sector Coal India Ltd (CIL), indicating that the fundamentals of the IPO are strong relative to other listed equity securities, the agency said on Friday.

The state-owned company, the world's largest producer of coal, is planning to raise Rs13,000 crore through an IPO to help fund infrastructure projects in the country. This will be the largest IPO in the Indian capital market after Reliance Power's offer in January 2008, through which the company had raised Rs11,500 crore.

The union cabinet has approved a divestment of 10 per cent of government's stake in the 'navratna' or highly profitable PSU. The centre currently holds all the equity in the company. CIL owns and operates 471 coal mines, of which 163 are open cast, 273 are underground and the rest are mixed. Coal production is carried out by the seven subsidiaries of the company.

The company will offload around 630-million shares through a book-building process which is to be launched in October. The assigned grade reflects CIL's dominant position in the Indian coal industry, reflecting its 81 per cent market share, meeting 53 per cent of India's energy requirement. It noted that coal demand was expected to rise 11.2 per cent annually over the next four years.

Head of securities, Crisil, Chetan Majithia said was the first instance of an IPO of a PSU graded by Crisil getting the topmost grade. Two other issues had made this grade in 2008. Top officials in the union government's disinvestment department said that the grading showed the strength and value of the company.

IPO grading was made mandatory by the Securities and Exchange Board of India in April 2007.