NEW DELHI: Coal India, whose $3.5 billion IPO was more than 15 times subscribed, has been asked by the capital markets regulator to offer investors an exit option until October 25 after errors were pointed out in its prospectus, the state-run company's chairman said. Partha Bhattacharyya said figures were "interchanged" in two places and termed them as "typographical errors".
Finance Director A.K. Sinha said accretion in stock and other income got interchanged in the company's standalone financial statement printed in the prospectus and it had no impact on the company's total income and profit figures.
Asked if the exit option would have any impact on the subscriptions, Bhattacharyya said: "This is a trivial kind of a thing. We wanted to abide by the regulation. "I don't see any impact."
Coal India's initial public offering (IPO) drew bids for at least Rs 2.3 lakh crore, or $54 billion in cash—enough to build 25 airports similar to the sparkling New Delhi one—indicating investors' eagerness to buy if shares are priced reasonably.
Janus Capital, Fidelity, Franklin Templeton and Capital International led overseas investors' bids while State Bank of India , ICICI Bank and Life Insurance Corporation topped the list of domestic institutions, raising hopes of strong demand for forthcoming issues, said people familiar with the bids.
Coal India joins the league of top state-run companies in the world such as China's Agriculture Bank that sold $22 billion worth of shares and Brazil's Petrobras that raised $70 billion. Companies in emerging economies are drawing record funds as investors in developed markets fear a double-dip recession in their home countries.
"This is a premier organisation,” said finance minister Pranab Mukherjee. “It speaks how much confidence they enjoy."
State-run companies have been outperforming the market, with the BSE PSU Index gaining 25.5% in the last three years, compared with the Sensex’ 12.8%. Shares in Maruti Suzuki have risen 12-fold since the IPO, and utility NTPC’s have trebled.
The likely pricing of shares at the top end of the Rs 225-245 band will make it the biggest listed coal producer in the world, qualifying to be the global industry benchmark. It will be the seventh most valuable firm in the country.
Price band of the issue at a valuation lower than comparable global peers did induce investors to queue up as gains seems to be assured when it begins trade on November 4.
At Rs 245 apiece, Coal India would be trading at 12 times forward year earnings, compared with about 15 times for Australia's Gloucester Coal and 14 times for China's Shenhua Energy. Hypothetically, if the company gets to raise prices to global parity, its earnings per share may jump 323% to Rs 84.2, potentially giving it a market value of $143 billion, closer to the world's biggest iron exporter, Vale of Brazil, that was privatised in 1997.
The institutional portion of the book was subscribed 25 times, or with bids for $39 billion. Bankers said more than two-thirds of the book were subscribed by foreign funds. The $3.5-billion IPO goes past the record set by Reliance Power at $2.9 billion in 2008, and that of real estate developer DLF’s at $2 billion before that.
Success of the latest issue takes total fund-raisings by the state to Rs 17,500 crore this year, giving hopes that its Rs 40,000-crore target may be surpassed comfortably, if conservative pricing is followed.
PowerGrid, SAIL, IndianOil., ONGC , Shipping Corporation, Hindustan Copper and Manganese Ore are some of the companies that have lined up share sales.
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