Coal India mega share sale sails through; govt to get Rs 22,600 cr

Tribune News Service

New Delhi, January 30

Providing some relief to the government in its efforts to adhere to the fiscal deficit, the government’s 10% stake sale in Coal India on Friday got oversubscribed by 1.05 times and fetched about Rs 22,600 crore although retail investors gave the issue a tepid response.

This is also the biggest ever share sale by any private or public sector company in India and exceeds the previous record of over Rs 15,000 crore made by CIL itself in 2010.

However, the retail demand got a lukewarm response as 12.63 crore shares reserved for these investors could get bids for less than half the size (5.37 crore).

General category investors, which include FIIs, mutual funds, banks and insurance companies, bid for 1.2 times the shares reserved for them. Of the 50.53 crore shares on block for non-retail segment, bids for 60.83 crore shares were received.

The average bid price was, however, higher at Rs 360.11 for the retail category as against floor price of Rs 358. Retail investors would get a price discount of 5%.

The total issue of 63.16 crore shares got bids for 66.20 crore shares, generating demand worth nearly Rs 24,000 crore on offer, as per stock exchanges data. The issue got oversubscribed before the close of market hours.

The government had offered to sell 31.58 crore shares, or 5% stake, in CIL through a public offer, with an option to sell another 5%.

At the floor price of Rs 358 apiece, the public offering is estimated to fetch Rs 22,600 crore to the exchequer. This will make up for more than half of the budgeted disinvestment target.

Coal India was the second PSU to hit the market under the government’s disinvestment programme in the current fiscal, the first being SAIL in which shares worth about Rs 1,700 crore were sold.

Shares of Coal India closed at Rs 360.85, down 3.81% over previous close on the BSE.

Aditi Nayar, senior economist, ICRA, said a shortfall of around Rs 80,000 crore is expected relative to the budget estimates for Government of India’s net tax revenue for 2014-15, in spite of the expected impact of the hikes in excise levied on petrol and diesel on taxes garnered in the ongoing quarter.

While the stake sale in Coal India is encouraging, if the full-year target for disinvestment is missed, the impact of the anticipated shortfall in tax revenue would be exacerbated.

Kamlesh Rao, CEO, Kotak Securities, said going ahead, there are tailwinds for the revenue in the form of higher disinvestment proceeds (including CIL), telecom spectrum sale and further income from the hike in excise duties for petrol and diesel. Apart from these, the last quarter normally sees a large proportion of tax revenue accrual to the government. However, in case of a revenue shortfall, the government may need to resort to spending cuts, with a view to meet the fiscal deficit target of 4.1%, he added.