Coal India IPO is 12 times oversubscribed, Offer closes Today

Public sector Coal India Ltd’s (CIL) Rs. 15,000- crore public issue has received bids for nearly 12 times the issue size by Wednesday evening, when the issue closed for qualified institutional buyers (QIBs), indicating ample proof that the primary market, where the public offering of new shares take place, has revived.

According to tentative information available with the National Stock Exchange ( NSE), the issue was subscribed by 11.64 times by Wednesday evening. This means that over Rs. 1 lakh crore of investors’ money is locked up in the form of bids for a few days till the allotment is firmed up.

Though there were apprehensions on the timing of the issue, the pricing of the issue in the range of Rs. 225- 245 per share tilted the balance in favour of the ‘ Navaratna’ firm. Some broking houses have valued CIL at Rs. 300 per share.

The Centre is divesting its 10 per cent stake in CIL. At the upper- end of the price range, the CIL public issue will fetch Rs. 15,475 crore and at the lower- end it would get about Rs. 14,211.81 crore.

The issue price will be decided by a group of ministers (GoM) on October 23, while the firm is expected to list on the domestic stock exchanges by November 4.

The year 2010 saw strong revival of the primary market with about 62 public issues hitting the market, so far, threatening to eclipse 2007 as the year in which most money was raised through public offerings – including initial and follow- on offerings. Though there are several similarities between 2007 and 2010 on the public offerings front, the mood in the primary market is not as ebullient as it was in 2007.

“ While the rally of 2007 was featured with euphoria, the rally of 2010 is featured with a sense of scepticism. While nobody used to feel that market will fall in 2007, everybody feels that market will fall in 2010. From the psychological point of view, that probably is the main difference,” said Jagannadham Thunuguntla, strategist and head of research, SMC Global Securities.

In 2007, the average oversubscription of the retail portion of all the IPOs was about 8.25 times. There were about 41 IPOs that saw double- digit oversubscription in that year. The highest oversubscriptions were seen in the IPOs of Everonn Systems ( 124 times the issue size) and Religare ( 94 times).

In 2010, the average oversubscription of the retail portion of all the IPOs was about 1.68 times. In the years 2010, there have been just 13 IPOs that saw double- digit oversubscription. The highest oversubscription was seen in the IPOs of Career Point (with 32 times) and Persistent Systems (with 22 times).

During 2007, about 37.21 lakh new demat accounts were opened while in 2010, about 13.84 lakh demat accounts were added. During the two months of December 2007 and January 2008 (that is just before the Reliance Power IPO), the new demat accounts that were added were an unprecedented 15.50 lakh.

“ During the month of September, 2010 ( that is just before Coal India IPO), the new demat accounts that got added were to the tune of about 1.38 lakh. The October 2010 numbers of new demat accounts are yet to be available. However, they may not be anywhere close to the 2007 additions,” Thunuguntla said.