Govt proposes to sell up to 3% stake in Coal India via OFS; floor price set at Rs 225 per share

State-owned Coal India Ltd will launch a two-day offer-for-sale (OFS) from Thursday as government is proposing to sell up to 3 per cent stake. The floor price for offer is set at Rs 225, which is at a 6.7 per cent discount to Wednesday’s closing price of Rs 241.20 on BSE. In total, Coal India is expected to raise up to Rs 4,000 crore by selling up to 18.5 crore shares.

The Coal India OFS will be a part of the government’s plan to divest its stake in public sector undertakings. At present, the government owns 66.2 per cent stake in the coal producer.

On Thursday, the OFS will open for subscription for non-retail investors only. These investors, while placing their bids, can flag their willingness to carry forward their un-allotted bids to T+1 day for allocation to them in case the retail category stays unsubscribed.

SBICAP Securities Limited will be the broker for the OFS. Government has proposed to sell up to 1.5 per cent stake in Coal India with option to sell additional 1.5 per cent stake.

The proposal is to offload 9.24 crore shares amounting to a stake of 1.5 per cent in the coal producer. Besides, there will be a green shoe option for selling an equal amount of stake in case of over subscription, Coal India said in a regulatory filing.

''The seller proposes to sell up to 9,24,40,924 equity shares of face value of Rs 10 each of the company (representing 1.50 per cent of the total paid-up equity share capital of the company) (base offer size), on June 1st and 2nd for retail investors and non retail investors,'' the filing said.

There will be an option to additionally sell 9,24,40,924 (1.5 per cent) equity shares of the company, it added.

In November last year, a Bloomberg report suggested the government was planning to sell 5-10 per cent of Coal India, Hindustan Zinc and Rashtriya Chemical and Fertilisers.

Watch: Know about CSK star player Ravindra Jadeja’s wife BJP MLA Rivaba Jadeja who touched his feet post IPL final, CSK vs GT IPL 2023

The government is targeting to raise Rs 1.75 lakh crore from divestment in PSUs in the current financial year.

Coal India on Tuesday also said it has increased prices of non-coking coal by 8 per cent, a move that will help offset 50 per cent of higher employee cost post wage hike announced in January 2023. The prices will come into effect from Wednesday, the miner said in a regulatory filing. This is the first major hike since January 2018.

Analysts gave thumbs up to Coal India's decision to increase prices for its high grade (G2 to G10) non-coking coal by 8 per cent with effect from May 31, even as they do not see more such increases in the near term, considering the inflationary environment and upcoming elections.

The price hike is seen realising an incremental revenue of Rs 2,700 crore for Coal India in FY24 and helping the PSU offset 50 per cent of higher employee cost post wage hike announced in January 2023. The hike in conjunction with higher FY24 volumes has the potential to neutralise EBITDA decline, analysts said.

Also Watch: Top stories on 1st June: GST May collection, PMI nos., Petrol Price, Gold Price, New Parliament Building to open for public viewing, Operation Blue Star anniversary & more

Kotak Institutional Equities said restricting price revision to high-grade coal possibly compensates for life-high e-auction realisations and contains the fuel bill for electric utilities already burdened by high-cost imports.

Kotak said, faces headwinds from lower auction prices, higher-than-provisioned employee cost and now, lower-than-expected revision in FSA prices. Street has been optimistic about the revision in FSA prices, which have so far been restricted to high-grade coal alone (30 per cent of sales). The brokerage has a target of Rs 240 per share on the stock.

Also Read : Coal India's first price hike since 2018 to support stock valuation; here are new share price targets

Also Read : Coal India raises non-coking prices by 8% from May 31; expects Rs 2,703-cr incremental revenue