Coal India IPO…5% discount for retail investors and employees

At the upper band of Rs245, CIL would trade at 12.1x P/E and 6.4x EV/EBIDTA on FY12E.

October 15, 2010 6:32 IST | India Infoline News Service

The nation's largest public issue so far is here.Coal India plans to raise up to Rs. 151.54bn (US$3.5bn) through an IPO. On Tuesday, the Government set a price band of Rs. 225 to Rs. 245 a share for the Coal India IPO.

Coal India Ltd. Chairman Partha Bhattacharyya said on Wednesday that the company has set aside US$1.2bn for overseas acquisitions in the current fiscal year.

He further added that the focus will be on expansion of profit margins in the future and that Coal India will go for washing of coal in a big way. Margin growth will be a dominant focus in future, he said.

The IPO would surpass Reliance Power Ltd.’s Rs. 116nm IPO in January 2008.
The Government is selling 631.6 million shares. The retail investors and Coal India employees will be offered a 5% discount.

The IPO will start on Oct. 18 and will close on Oct. 21.

Citigroup Inc., Deutsche Bank AG, Bank of America Corp., Enam Securities Pvt. Ltd., Kotak Mahindra and Morgan Stanley will manage Coal India’s IPO.

Coal India Ltd (CIL) is the best play to ride on the increasing coal deficit in the country. CIL enjoys a near monopoly with a dominant 82% share in domestic coal production and is the world’s largest coal producing company. Being one of the lowest cost producers globally (US$16/ton) has enabled it to maintain healthy margins despite selling coal at a huge discount.

At the upper band of Rs245, CIL would trade at 12.1x P/E and 6.4x EV/EBIDTA on FY12E. Employees and retail investors will be given the benefit of 5% discount on the final price.

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