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Thursday, October 21, 2010

Coal India IPO on Fire - Oversubscribed 11.85 Times

Rs 15,000-cr issue gets bids worth Rs 1,83,000 crore; IPO gets 11.85 times oversubscription so far; Retail quota oversubscribed; FIIs put in maximum bids.

The mega IPO of Coal India Ltd (CIL) is heading for a thumping success for the government. The 15,000 crore issue has attracted bids worth a record Rs 183,000 crore so far, indicating an oversubscription level of 11.85 times. The issue received huge response from qualified institutional investors (QIBs), especially foreign investors (FIIs). Even the retail portion which will close on Thursday has already been oversubscribed after a sluggish opening on Monday.

According to investment banking sources, the good response to the Coal India issue is expected to encourage other public sector companies like Hindustan Copper, MOIL, Power Grid and Indian Oil to come out with issues in the coming months. With the retail quota in CIL IPO getting oversubscribed, the apprehension among investment bankers about the IPO has evaporated. Many PSU issues earlier this year evoked luekwarm response from retail investors. "By the time the issue closes on Thursday, the value of total bids would have crossed Rs 200,000 crore. This is a record in the IPO market," said a banker.

While there were 63.16 crore CoaI India shares up for sale, bids came for 748.64 crore shares, showing a subscription level of 1,185 per cent. As Wednesday was the last day for submitting QIB applications, there were frenzied bidding for the IPO. Domestic institutions who were keeping a low profile till Tuesday swung into action today and put in bids for 180.7 crore shares worth Rs 45,500 crore. FIIs put in bids for 493.3 crore shares valued at Rs 120,000 crore. As per the BSE data, the QIB quota which closed on Wednesday was oversubscribed 24.7 times.

According to the NSE, the non-institutional quota (including companies and HNIs) has been oversubscribed 289 per cent (2.89 times). The retail investor quota has already witnessed 110 per cent oversubscription. While 19.86 crore shares are on offer for retail investors, bids for 21.80 crore have already come in by Wednesday. The retail portion is expected to get further good response on Thursday, bankers said. Coal India's IPO is the largest ever by an Indian company so far. "The IPO has achieved several purposes. It has met with good response. Secondly, it has fired up the IPO market. It has also diverted money, mainly FII money which was earlier going directly to the stock market. When the IPO opened, FII inflows to the stock market dropped significantly," said a market source.

However, the huge response to the Coal India IPO sucked liquidity away from the stock market. As a result, Dalal Street declined for the second straight session on Wednesday with China's key interest rate hike and a strengthening dollar adding to the investors' nervousness. The Bombay Stock Exchange's 30-share barometer Sensex, which had lost 186 points on Tuesday, ended the day at 19,872.15, down another 110.98 points, or 0.59 per cent — its lowest close since September 29, when the index had settled at 19,956.24. On the National Stock Exchange, the 50-share Nifty Index fell below the 6,000 level to close at 5982.10 points, down over 45 points. The Sensex decline was in line with sluggish Asian markets, as sudden rate hike on Tuesday by the Chinese central bank raised apprehensions.