The company proposes to sell up to 18.62 crore shares today and an additional 37.24 crore on November 1
The central government will divest up to 3% stake in the state-owned Coal India Ltd (CIL) through an offer for sale. The state-owned company also has an option to sell additional 6% stake through green shoe (over-subscription) option to retail investors and financial institutions at a floor price of Rs 266 per share, as it aims to raise around Rs 14,000 crore through stock market transactions.
The floor price is at a discount of 3.58% to Tuesday's closing price of Rs 275.90 on the BSE.
In a regulatory disclosure to the bourses, the coal ministry said it proposes to sell up to 18.62 crore, or 3% equity shares of face value of Rs 10 each on October 31 to non-retail investors and November 1 to both non-retail and retail investors, with an option to additionally sell up to 37.24 crore, or 6% equity shares.
The stake dilution will help CIL to reduce the promoter's shareholding to almost 75.32%. As per the Sebi norm, the minimum public holding in a listed entity should be at least 25%. The proposed move would fetch the exchequer around Rs 4,000 crore, said a senior company official on condition of anonymity. In case, the greenshoe option is also exercised, it will bring down the government's holding in the company to 69.32% and would help raise around Rs 9,907 crore.
According to the company official, a dilution of a 9% stake would fetch the government around Rs 14,000 crore, since retail investors and employees will be offered shares at a discount to the cut-off price which will be determined on October 31.
However, up to 5% of the offer shares will be offered to eligible and willing employees at a discount of up to 5% to the cut-off price in the retail category of the offer, the disclosure further said. Around 20% of the offer size will be reserved for retail investors, who will be allocated shares at a discount of 5% to the cut-off price. The cut-off price, the lowest price at which the offer shares will be sold, will be determined on the basis of all valid bids received in the non-retail category on October 31, it added.
For non-retail investors, a minimum of 25% of offer shares shall be reserved for mutual funds and insurance companies, the regulatory filing said.
According to a sector analyst, who does not wish to be named, the government has been waiting to divest stake in CIL for long. Historically, the company used to trade at 6.5x multiple and based on that multiple, the stock would be Rs 300-plus. Because of global coal issues and less interest to invest in the coal sector, the multiples came down to almost 5.5x.
"This is not a bad price and to offload such a big stake, you have to give some discount," the analyst said, adding that the market has been depressed because there was an expectation about the offer for sale.
Coal India shares touched a 52-week high of Rs 316.55 on February 27, and a 52-week low of Rs 256 on June 28.
The analyst also said the government needs cash. The dividend yield of CIL is not more than 6% and if it has to borrow, the government yield is 8%. So, instead of borrowing at 8%, it is giving out a dividend yield stock at 6%, which is still a good deal for the government, excluding the option of capital appreciation, the analyst added.
BLACK GOLD
- 3.58% – Discount to the Tuesday’s closing price of Rs 275.90 the shares are being offered
- The state-owned company also has an option to sell additional 6% stake through green shoe (over-subscription) option to retail investors and financial institutions at a floor price of Rs 266 per share
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