THE INDIAN government is due to open the country’s largest ever initial public offering (IPO) today, in which it hopes to raise 150bn rupees (£2.1bn) by selling a 10 per cent stake of state-owned Coal India.
The company is the largest coal miner in the world, producing 80 per cent of India’s coal in 471 mines and holding around 22bn tonnes of coal in extractable reserves.
The sale share is set to top the massive $70bn rights issue undertaken by Brazilian energy firm Petrobras in September. Retail and institutional investors have until Thursday to sign up for shares, and the company is due to list on the Mumbai stock exchange from 4 November.
India hopes to attract overseas investment with the sale, which the government has said will help fund social programmes and reduce the budget deficit. The divestment is part of the government’s plan to raise £5.3bn by March by selling holdings in state-owned companies.
The IPO has already affected the Indian economy, with the rupee gaining 5.3 per cent in the last month in part due to the expectation of foreign investment.
The Indian government strengthened the company’s position on Friday, when the Prime Minister’s office said Coal India is free to fully exploit its coal reserves. The firm’s future expansion had been uncertain after the environment minister declared around 40 per cent of its reserves out of bounds in order to protect the country’s forests.
SHARE SALE ADVISERS
Coal India seems to have spared no expense for its £2.1bn rights issue, having hired six banking giants to manage the record share sale. Only two of the firms are based in India, though all the institutions have a large presence in the country.
Citigroup was part of a conglomerate that earlier this month lent $1.2bn to coal firm New World to aid its takeover bid for Poland’s only public-traded coal producer. Citi, alongside fellow Coal India adviser Merrill Lynch, were hired to help a group of Australian coal producers including BHP Billiton in their doomed $6.4bn bid to prevent the privatisation of Queensland’s railway lines.
Morgan Stanley, also advising, has a $4bn Indian-based investment fund with a focus on companies in the region.
Enam Securities is an Indian-based underwriter, best known for working with Middle East Coal in 2009 when the firm went in search of partnerships in India.
Deutsche Bank and Indian investment bank Kotak Mahindra Capital make up the remainder of the advising team.