Mumbai: Those who have invested in Coal India Ltd's Rs15,000 crore public float will get a five-day window if they wish to withdraw their applications in India's biggest ever initial public offer (IPO). Investors can withdraw their bids because there has been a mistatement in Coal India's financials.
Investors will be able to withdraw their bids till the end of Monday, 25 October.
S. Subramanian, head - investment banking, Enam Securities Ltd, one of the merchant bankers handling the IPO, said: "The withdrawal option has been given because of a small clerical error in the financial statements of Coal India. The statements have interchanged other income with closing stock. This has led to some difference in numbers.We have issued a corrigendum. Hence, this withdrawal option."
Investment bankers are responsible for due diligence of the prospectus. In recent past, two other firms had to open such an window because of errors in prospectus. .
The capital market regulator has asked these firms to allow investors withdraw their applications.
Investors fear that this could push the listing cycle beyond the originally projected 12 days from closure of offer.
"There are some minor mistake in the (statements). If there are huge withdrawals, then we may have a problem. But we do not expect this," said M.V. Ramnarayanan, LINK Intime Ltd, the share registry of Coal india.
Coal India's initial public offering - on track to be India's largest ever - was more than 15 times oversubscribed on its final day as foreign investors snapped up shares, adding momentum to New Delhi's ambition to raise billions by selling off stakes in state-run companies, stock exchange data showed Thursday.
Strong investor demand augurs well for the government's 400 billion rupee ($9.0 billion) disinvestment program this fiscal year, even as some question the wisdom of relying on volatile capital flows to plug the nation's fiscal deficit.
A government panel is expected to meet Sunday to decide the final pricing of the offer. Most of the bids came in at the high end of the 225 rupee to 245 rupee ($5.07 to $5.53) per share range, suggesting that the offer will raise around $3.5 billion, making it India's biggest IPO so far, trumping Reliance Power's $2.96 billion offer in 2008.
The Indian government is benefiting from huge cash inflows toemerging markets, as developed world investors flee lowinterest rates in search of high growth, pushing IPOs across the region to record valuations.
But during the depths of the financial crisis, the situation was the reverse: Liquidity-starved foreign investors fled emerging markets, seeking apparent safe havens for their dwindling portfolios. India's stock market and the rupee both plunged.
"There is a concern that there is too much money getting into the emerging markets and into well-timed IPOs like Coal India," said Yes Bank chief economist Shubhada Rao. "These concerns may be short lived. In the global economy where anemic growth is expected over the next 12 to 18 months, economies like India will continue to attract capital inflows on the back of strong fundamentals."
The government of India is selling off 10 percent of its stake in Coal India, which controls about 80 percent of the nation's coal market. Attractive pricing - IIFL Capital analysts put the fair value at 300 rupees ($6.77) a share - and the appeal of a company that enjoys near monopoly control of a coal-dependent market where demand outstrips supply outweighed investor concerns.
Those include rising Maoist violence in India's coal belt, regulatory hurdles that have stalled projects, and the legacy of years of loss-making state ownership. Coal India voluntarily sells its coal below market rates and is slowly chipping away at its swollen employee roster.
The institutional part of the Coal India offer was 24.7 times oversubscribed, with foreign investors accounting for 70 percent of institutional demand. The retail portion was 2.2 times oversubscribed, according to Thursday night data from the Bombay Stock Exchange and the National Stock Exchange.
"It gives a good sentiment for future disinvestment coming in," said Sanjay Sharma, head of equity capital markets at Deutsche Equities India, a unit of Deutsche Bank ( DB - news- people ), which was one of the managers on the deal. "All bodes well."
Sharma said retail demand was better than anticipated, and he expects the average investment to be 70,000 to 75,000 rupees ($1,580 to $1,693), higher than past averages of 40,000 to 45,000 rupees ($902 to $1,015).
The one group that seemed uninterested the Coal India offer: Employees.
Some unions have protested against the stake sale. Despite their 5 percent discount - which was also offered to retail investors - employee bids accounted for less than 10 percent of their reserved shares.
Sharma said it was unreasonable to expect that Coal India's nearly 400,000 employees - most of whom are laborers - would have the wherewithal to buy out their portion of the offer. That would have required an average investment of about 40,000 rupees ($902) by each employee.
Still, the government tried to make the offer inclusive, plastering Mumbai with large billboards proclaiming: "You are a coal rich Indian."
"For the disinvestment program, one of the objectives is to get money for the social schemes of the government, but it's also driven by the concept of sharing the wealth with the retail investors," Sharma said. "One could do a quick institutional placement but they've taken a conscious decision to make a retail offering allowing everyone to participate."
Safe Harbor Statement:
Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.Nothing in this article is, or should be construed as, investment advice.
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