CIL issue oversubscribed on institutional support

The initial public offering (IPO) of state-run Coal India Ltd, the world's largest producer of the fuel, (CIL) was subscribed 1.57 times on the second day itself on the back of good response from qualified institutional investors.

The issue, with a price band of Rs225-245 a share, received bids for 99.12 crore equity shares as against the issue size of 63.16 crore shares.

The reserved portion of QIBs got subscribed three times, though the retail and non-institutional investors' portion was oversubscribed just 0.3 times and 0.5 times respectively.

The government aims to raise more than Rs15,000 crore through the IPO, which will be largest ever amount raised by an Indian company through a public offering. The company will not receive any proceeds from the offer and all proceeds will go to the selling shareholder (the union government), whose stake will drop to 89.99 per cent after the issue.

The offer constitutes 10 per cent of the post-offer paid-up equity share capital of the company. The issue will close on 20 October for QIBs and 21 October for non-QIBs. The company is set to list on the stock exchanges on 4 November.

Book runners to the issue are Citigroup Global Markets India Pvt Ltd, Deutsche Equities (India) Pvt Ltd, DSP Merrill Lynch Ltd, ENAM Securities Pvt Ltd, Kotak Mahindra Capital Co Ltd, and Morgan Stanley India Co Pvt Ltd.

Experts believe the mega public float will attract foreign investors and lead to a surge in dollar inflows, pushing the Indian rupee further up. It could cause a liquidity crunch for a short while and lead to correction in the secondary market.

Coal India produces over 80 per cent of India's coal through 471 mines across eight states. It produced 431.26 million tonnes of raw coal in 2009-10.