Coal India OFS

The coal ministry, on behalf of the President of India  which holds 78.55 stake in Coal India will offer three per cent stake to the institutional and non-retail shareholders  on 31-10-18. The Coal India OFS issue for retail investors shall open on 01-11-2018.  Coal India has kept the option to sell an additional 6% shares. The government could get around Rs 5,000 crore from the  the 3 percent stake  and if  additional stake sale of  6 percent  gets sold, government could raise about Rs 15,000 crore in total.

The offer for sale will help Coal India to conform to the minimum public holding norm of 25 percent which otherwise  it should have complied by Aug 2018

About Coal India OFS (CIL  OFS)

Offer Size18,62,22,275 shares ( With an additional option to sell upto 37,24,44,550 shares  )
Retail Offer Size20 % of Issue Size reserved for Retail Investors ( In case Seller exercises the Oversubscription amount on T day, not less than 10 % of the Offer Size shall be reserved for the Retail Investors for allocation on T + 1 day )
Retail Discount 5% to the Cut off price 
Reservation to Retail Investors3,72,44,455 shares ( With an additional option to sell upto 7,44,88,910 shares  )
Non-Retail Offer Size14,89,77,820 shares ( With an additional option to sell upto 29,79,55,640 shares  )
Market Lot1 share
Tick SizeRs 0.05
Face ValueRs 1/-
Floor PriceRs 266.00/-
Allocation MethodologyPrice Priority Method
Bid Opening Date ( IC/MF/OTH/NII)31st October’2018
Bid Closing Date   ( IC/MF/OTH/NII)31st October’2018
Bid Opening Date ( Retail)1st November’2018
Bid Closing Date ( Retail)1st November’2018
Update Day 1

The stake sale in Coal India saw strong response from institutional investors on Day 1 and was oversubscribed.

OFS Allocation Methodology

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  • Retail investor shall mean an individual investor who places bids for Offer Shares of total value of not more than Rs. 2,00,000/- (Rupees Two Lakhs) aggregated across Stock Exchanges.
  • A Retail Investor may bid at any price above the Floor Price and/or bid at “Cut-Off Price”. “Cut-Off Price” means the lowest price, as shall be determined, at which the Offer Shares are sold in the Non-Retail Category, based on all valid bids received on T Day.
  • Allocation to retail Investors shall be made based on the Cut-Off Price. Upon determining Cut-Off Price for the Retail Investors, the Other Shares reserved for such category shall be allocated to eligible bids of Retail Investors on price priority method at multiple clearing prices / Cut-Off’ price in accordance with SEBI OFS Circulars. In the case of retail potion being oversubscribed, the aggregate number of Offer Shares bid for at a particular clearing price / Cut-Off Price, as the case may be, is more than available quantity then the allocation for such bids will be done on a proportionate basis at such clearing price (at or above the Cut-Offer Price) / the Cut-Off Price, as the case may be.
  • Individual investors shall have the option to bid in the Retail Category and the Non-Retail Category. However, if the cumulative bid value by such an individual investor across both categories exceeds Rs. 2,00,000/- (Rupees Two Lakhs), the bids in the Retail Category will become ineligible. Further, if the cumulative bid value by an individual investor in the Retail Category across the Stock Exchanges exceeds Rs. 2,00,000/- (Rupees Two Lakh only), such bids shall be rejected.
  • Settlement shall take place on a trade for trade basis. For bids received from Non-Retail Category on T Day, non-institutional investors and institutional investors who place orders with 100% of the order value deposited upfront, settlement shall take place on a T+I Day, in with the SEBI OFS Circulars. In the case of institutional investors who place bids without depositing 100% of the order value upfront, settlement shall be as per the existing rules for secondary market transactions (i.e., on T+2 Day).
    For the bids received on T+l Day, from the Retail Category and from the un-allotted non-Retail Investors who choose to carry forward their bid to T+l Day, the settlement shall take place on T+3 Day.
    In case of non-institutional investors and institutional investors bidding with 100% margin upfront who chose to carry forward their un-allotted bids to T+1 Day, the settlement shall take place<on_T+2_Day.
  • The allocation to the non-Retail Investors shall be at price equal to the Cut-off Price or higher as per the bids.

About Coal India

Coal India is the largest coal producing company in the world. Coal India production of raw coal stood at 431.26 million tons in fiscal 2010. The company also produces non–coking coal and coking coal  for diverse applications. The 11 coalfields in which it conduct its most significant mining operations are the Korba, Singrauli, Talcher, IB Valley, Wardha Valley, Jharia, North Karanpura, Central India Coalfields, Raniganj, Rajmahal/Deogarh and East Bokaro coalfields.

Its customers include large thermal power generation companies, steel and cement producers with most of the company coal used in the thermal power sector.The company has nine direct Subsidiaries and two indirect Subsidiaries.

Coal India Earlier OFS

In 2015 coal India came out with an OFS at a floor price of Rs. 358. This was meant to reduce GOI stake in Coal India from 89.65% to 79.65%  The Offer For Sale (OFS) was for 315.8mn shares or 5% stake,  with an option to sell the same number of shares as a green shoe option

CIL OFS 2015 – No. of SharesTotalNon RetailRetail
Base Issue Size (A)31,58,18,22025,26,54,5766,31,63,644
Additional shares offered (B)31,58,18,22025,26,54,5766,31,63,644
Total Issue Size (A+B)63,16,36,44050,53,09,15212,63,27,288
Quarterly Results (figs in Rs. Crore)

 Jun-18Mar-18Dec-17Sep-17Jun-17Mar-17
Gross Sales22597.825108.6920708.4717478.5219810.4524025.04
Excise Duty00001406.131608.62
Net Sales22597.825108.6920708.4717478.5218404.3222416.42
Total Income25470.8628894.0722484.1418759.0120368.2925025.27
Total Expenditure18528.4126713.6817025.4316917.3515639.7119782.39
PBIDT6942.452180.395458.711841.664728.585242.88
Interest110.34112.7297.44100.65120.98114.57
PBDT6832.112067.675361.271741.014607.65128.31
Depreciation745.24931.11751.06714.6670.35847.18
Tax2302.53-142.031605.19657.551585.951560.57
Profit After Tax3784.341278.593005.02368.862351.32720.56
EPS 6.12.064.840.593.794.38
Equity6207.416207.416207.416207.416207.416207.41
PBIDTM(%)30.728.6826.3610.5425.6923.39
NPM (%)16.755.0914.512.1112.7812.14

Coal India  Share Price Chart

Coal India OFS price chart

 

Salient points and Assessment:
  • CIL’s last OFS was in Jan 2015 and witnessed a marginal over subscription.
  • CIL gave Rs. 8,044 crore on account of dividend for the financial year 2017-18.
  • Retail Investors can bid in “RI” and “RIC” Category upto (i.e. less or equal to) Rs 2 lacs
  • To place Retail Investor bids at Cut Off Price, Users are required to select RIC category
  • Cut-off price will be determined based on the bids received on T Day
  • Coal India OFS floor price is at discount of 4% to closing price of Rs 277 on the NSE. Retail will get a further discount of 5%. 
  • Bidding in OFS opportunities is challenging for retail investors because of the need to may money upfront and change in bid price by large investors at the last moment. Hence chances of allotment many times is difficult. This may not be the case in Coal India OFS due to relatively large size. 
  • Coal India OFS appears to be a reasonable opportunity as company’s fundamentals are strong.
  • The Post has been delayed due to some circumstances beyond my control.
  • Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.