Thursday, January 29, 2015

Coal India OFS Review - Retail Investor should not miss such golden opportunity

On one hand we have secondary market posting new historic highs and FIIs being the rampant buyers for all this while, primary market remained silent with no activities. 

However, fewer SME as well as OFS offers kept visiting the market. But now the mega OFS (Offer for Sale) offer is opening on Friday i.e. 30.01.15 for Coal India whereby Government of India is looking at mobilizing around Rs. 23K to Rs. 24K crore. 25% of such OFS is reserved for Mutual Funds, Insurance Companies. Details of this offer are as under:

Base size of the offer is 5% stake dilution at a floor price of Rs. 358 against its closing price of Rs. 375.15 on Thursday eve. In the base size for 5% stake dilution, total shares on offer are 315818220 shares of Rs. 10 each at a floor price of Rs. 358 with a tick price limit of Rs. 0.05 paise per share. 252654576 shares are reserved for Non-Retail and 63163644 shares for retail category. If the offer gets overwhelming response the size will be doubled for the respective categories to make 10% dilution as planned originally. Retail investors are eligible for 5% discount to the final offer price. The offer opens at 9.15 am on BSE and NSE and will close at 15.30 pm. The allotment will be on price priority basis. As this is online offer, the minimum lot size is 1 share, but investors should go for what they can based on their fund position.

Selling members include 1) DSP Merrill Lynch Limited 2) Credit Suisse Securities (India) Private Limited 3) Deutsche Equities India Private Limited 4) Goldman Sachs (India) Securities Private Limited 5) J M Financial Institutional Securities Limited 6) Kotak Securities Limited 7) SBICAP Securities Limited and the seller promoter is The President of India acting through and representated by the Ministry of Coal, Government of India.

Soon after this, we are likely to witness more OFS (divestment) from Govt. of India in the form of ONGC, RCF, IOC, NMDC, BHEL, Nalco, Dredging Corp, PFC, REC etc as the Government is looking serious for raising the targeted Rs. 43425 crore before this fiscal end. Thus this offer is going to be the biggest OFS from the same company that did a record of biggest IPO for Rs. 15199 crore in October 2010.

In the current fiscal so far, Govt. Of India could raise only Rs. 1715 crore by way of divestment. It appears that Finance Ministry does not prefer to miss this golden opportunity as secondary market is at its high spirit at this juncture and is thus trying to set an example of daring to bring issues for primary market that is still in dilemma.

As far as retail investors are concerned, they should not miss such golden opportunities and should go ahead to grab it through their brokers.

Review By Dilip Davda