Coal India, a leading PSU coal producer, has recently witnessed substantial interest from institutional investors for the government’s offer-for-sale (OFS). The two-day OFS, aiming to sell a 3% stake in Coal India, attracted enthusiastic participation, leading to oversubscription. The Department of Investment and Public Asset Management (DIPAM) Secretary reported that non-retail investors subscribed to the issue at a rate of 3.46 times the base size. This successful response prompted the government to exercise the green-shoe option, with retail investors scheduled to bid on Friday.
In the secondary market, Coal India’s shares experienced a slight decline, closing at Rs 230 per share, reflecting a 4.66% decrease compared to the previous day’s closing price. However, the sale of a 3% stake, if fully subscribed, could generate over Rs 4,000 crore in funds for the government. The OFS was priced at a floor price of Rs 225 per share, offering a discount of 6.7% from Wednesday’s closing price.
The government presently holds a 66.13% stake in Coal India, making this stake sale significant for advancing the government’s disinvestment targets. This move marks the first Public Sector Undertaking (PSU) stake sale of the current fiscal year and demonstrates the government’s commitment to divesting its holdings in various public enterprises.
To provide more context and address potential questions, let’s delve deeper into the details surrounding the Coal India OFS.
The article focuses on the offer-for-sale (OFS) of a 3% stake in Coal India Ltd by the Indian government. The government plans to divest its holdings in the leading PSU coal producer, allowing institutional and retail investors to participate in the share sale.
Overview of Coal India OFS
Coal India, a prominent public sector undertaking (PSU), is set to undergo an offer-for-sale (OFS) wherein the government aims to sell a 3% stake in the company. This move is part of the government’s broader strategy to reduce its stake in public enterprises and meet the disinvestment targets set for the fiscal year.
Institutional Investors’ Response to the Offer-for-sale
Institutional investors overwhelmingly responded to the OFS. A subscription rate of 3.46 times the base size was seen in the non-retail category, demonstrating a strong degree of interest in and trust in Coal India’s prospects. The government used the green-shoe option as a result of the eager institutional investors’ involvement, highlighting the enthusiasm for the share sale even more.
Details of the two-day OFS
The offer-for-sale spanned two days, with institutional investors being the first to participate. The government offered over 18.48 crore shares, representing a 3% stake in Coal India. The shares were priced at a floor price of Rs 225 per share, which amounted to a discount of 6.7% compared to the closing price on the previous trading day.
Green-shoe option and retail investor bidding
Following the successful response from institutional investors, the government decided to exercise the green-shoe option. This option allows for an additional 1.5% stake to be offered in the event of oversubscription. Retail investors will have the opportunity to participate in the bidding process, which is scheduled to begin on Friday. This move aims to provide retail investors with a chance to invest in the lucrative opportunity presented by the Coal India OFS.
Share price movement in the secondary market
While the OFS was underway, Coal India’s shares witnessed a slight decline in the secondary market. The shares closed at Rs 230 apiece, reflecting a 4.66% decrease compared to the previous day’s closing price. This price movement could be influenced by various market factors and investor sentiments.
Significance of Coal India’s stake sale
The stake sale in Coal India holds significant importance for both the government and investors. For the government, this divestment represents progress towards the disinvestment target of Rs 51,000 crore set for the current fiscal year. By reducing its stake in Coal India, the government aims to unlock value and attract more private sector participation, thereby driving growth and efficiency in the PSU.
Potential proceeds for the government
The stake sale of 3% in Coal India has the potential to generate substantial proceeds for the government. If fully subscribed, it is estimated to fetch over Rs 4,000 crore. These funds can be utilized for various developmental and welfare initiatives, contributing to the overall economic growth of the country.
The floor price and its discount
The floor price for the Coal India OFS was set at Rs 225 per share. This price represents a discount of 6.7% from the closing price of Coal India’s shares on the previous trading day. The discounted floor price aims to attract investor interest and ensure an equitable opportunity for participation.
Government’s current stake in Coal India
The government now owns 66.13% of Coal India. The OFS is an intentional step taken by the government to diversify and reduce its holdings. This programme fits well with the government’s overarching goal of fostering privatisation and raising public sector effectiveness.
Contribution to the disinvestment target
The stake sale in Coal India plays a crucial role in the government’s disinvestment target for the fiscal year. By divesting its holdings in various PSUs, the government aims to mobilize funds, reduce fiscal burden, and foster a favorable investment climate. The successful completion of the Coal India OFS brings the government one step closer to achieving its disinvestment goal of Rs 51,000 crore.
Conclusion
The offer-for-sale (OFS) of a 3% stake in Coal India Ltd by the Indian government has witnessed significant interest from institutional investors, resulting in oversubscription. The government’s decision to exercise the green-shoe option reflects the positive sentiment surrounding the stake sale. Retail investors are now eagerly awaiting the bidding process, scheduled to commence on Friday. The stake sale in Coal India represents an important step towards meeting the government’s disinvestment targets, generating substantial proceeds, and promoting private sector participation in the PSU.
About Coal India:
Coal India Limited is a central public sector enterprise in India that operates under the ownership of the Ministry of Coal, Government of India. Its headquarters are located in Kolkata. It holds the distinction of being the largest government-owned coal producer globally and is recognized as the seventh largest employer in India, employing approximately 272,000 individuals.
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