In a day, Coal India investors earn Rs6,477 crore

Shares of Coal India zoomed nearly 40% on debut on the bourses on Thursday, fuelled by huge foreign investor interest on the back of quantitative easing in the US and unmet demand.

The spectacular listing left investors wealthier by Rs6,476.64 crore.

Retail investors who had sought the maximum 408 shares were allotted a maximum 200 at a 5% discount, at Rs232.75.  By the end of trading, they had earned nearly Rs22,000.
The state-owned coal producer raised a whopping Rs15,147.43 crore from sale of 10% government equity, making it the country’s biggest initial public offer to date. The issue was oversubscribed  14.28 times.

The QIB portion saw 24.71 times subscription, while retail investors and high networth individuals bid for 2.31 times and 24.40 times the number of shares allocated for them.

The stock, which listed at Rs287.45 on the Bombay Stock Exchange, saw continuous buying throughout the day and finally closed near its intraday high at Rs342.35, up 39.7% over the issue price of Rs245.

At the end of the day, Coal India also emerged as the fourth-largest listed Indian company with a market capitalisation of Rs216,240 crore.
Retail investors and employees of Coal India together have become richer by Rs2,879 crore considering the discount of 5% they got on the issue price, while qualified institutional buyers (QIBs) have seen their investments grow by Rs2,767 crore.

“There is no doubt that it was a fabulous issue. Mostly, it can be attributed to three reasons —  the increase in interest rates which has brought clarity on what the government wants; second, the QE2 in the US, which will mean more money coming into India; and third, the right pricing of the issue. These things happened  on Tuesday and Wednesday was the listing day, so it was perfect,” said Dharmesh Mehta, managing director — institutional equity sales, Enam Securities.

The shares saw total cash turnover of `22,024 crore on the BSE and the NSE, accounting for 54.5% of the  cash market turnover.

Even though some retail investors cashed out, there was buying by institutions missing out on allocation. Delivery volumes were strong at 38.27%.

“Although the expectations were at Rs300 and it listed at that number and then went up, we should bear in mind is that it is a kind of stock that institutions want in their portfolio and had got only 5-10% earlier, so there was a lot of sudden demand and churning happening on the first day. What we can say is that the stock changed from weak hands to strong hands, and this will continue for sometime,” said P Phani Shekhar, fund manager - PMS, Angel Broking.

Experts believe that such strong listing of public issues from the government’s stable will improve retail investors’ confidence in the market.

“It was a stellar listing and better than expected and brings back the confidence in government offers after EIL, NHPC and NTPC failed to live up to the mark. Participation from retail was good and there was not much selling as somebody would have expected after such listing,” said Prakash Diwan, head - institutional business, Networth Stock Broking.

“We can’t say it is a trend and predict the future of other issues lined up, but surely, there is appetite in the market and if an issue is priced well, it will flourish. It is proven that not only FIIs but even domestic investors have money,” said Mehta.

Going ahead, experts see Coal India stock to settle at current fair value closer to Rs310-320 as selling pressure sets in coming days.

“It will take some days for the stock to reach its fair value and it will come back to over Rs300 levels and the extra premium, which is currently there, will be pruned,” said Diwan.

Phani Sekhar, however, said, “The stock has been bought as a fiscal 2013 story and unless some policy disappointments happen, major selling cannot happen in it.”