Check out: What experts say about Coal India IPO?

68175 Investors following Coal India. Share this News with them.

0

Like this story, share it with millions of investors on M3

Check out: What experts say about Coal India IPO?

The initial public offer (IPO) of India's largest coal producing company Coal India (CIL) has opened for subscription. It has been subscribed just 0.34 times on day one, as per NSE website.

Post your opinion here

 

0

Tweet

Share on Tumblr

Nifty BSE | NSE 23/05/12 Are Mutual Funds betting on Nifty?

The initial public offer (IPO) of India's largest coal producing company Coal India (CIL) has opened for subscription. It has been subscribed just 0.34 times on day one, as per NSE website. The support was led by qualified institutional investors (QIBs); their reserved portion subscribed 0.58 times.

The government expects to raise over Rs 15,000 crore through the IPO, which will be the largest ever amount raised by an Indian company via offering. The company will not receive any proceeds from the offer and all proceeds will go to the selling shareholder (GoI), whose stake will be 89.99% post the issue.

Experts as well as brokerage houses looked bullish on the company except Sanju Verma of Centrum Broking. Verma said she would not subscribe to it. "Coal India sells its coal at a 50-60% discount to what the global prices are at is simply because only 18% of the coal that it produces is top quality, 'A' grade coal. In fact, out of the 432 million odd tonne that it currently produces, only about 40 million tonne is washed coal. That is the coal that commands prices which are in line with international prices. The rest of the coal which is non-beneficiated coal does not command any premium and hence deserves to trade at prices that it trades at. At the end of the day this company is making profit after tax (PAT) of USD 220 million. There is a Peabody Energy which makes PAT of close to USD 480 million. Bhumi Resources makes PAT of USD 400 million. They deserve to trade at premium valuations and Coal India with a 30-40% discount in terms of profitability cannot command the same valuations. Everything put in context I am not really gung-ho," she explained.

Sounding optimistic about the paper, Suhas Harinarayanan of Religare said one should subscribe to the Coal India IPO as the issue price is attractive and the company is best positioned to meet the widening coal deficit. He views CIL as "a proxy to the Indian power sector in the country" and sees its profit growth at 15%-18%.

Abhineet Anand of Antique Stock Broking said the broking house has put a "subscribe" rating to the IPO, and he believes the fair value of the stock would be at Rs 265-315 per share.

"Given CIL's competitive advantage vis-à-vis global coal miners, its likely high earnings growth and the wide demand-supply gap for coal in India, we believe that Coal India's IPO has been attractively priced. We believe that CIL is an excellent long-term bet on the resources and energy sector and should be part of the core portfolio of an investor. We recommend subscribe, both from a short and long-term perspective, to CIL's IPO at the higher price band of Rs 245. There is a retail discount of 5%, i.e. Rs 12/share as well which makes it even more attractive," Aditya Birla Money said.