One of India’s most profitable ventures, the Coal India Limited’s Offer for Sale (OFS) is a major economic event of the financial year 2023-24. It is theorized to be a significant success of the Public Sector Undertaking (PSU) of the coal industry. This Offer for Sale has acquired bids worth Rs. 6500 crores and revenue worth around Rs. 4160 crores. The institutional investments have garnered 1.6 times the share on offer. The floor price was Rs. 225 but the bids reached around Rs. 226. While the names of the bidders are not known, it is suspected to be a group of domestic and state-owned mutual funds and other significant investors.
This phenomenon is the result of the government’s wish to offload about 3 percent of the company’s stake. On the 7th of June, the price of the shares was announced as Rs. 241 but later the retail price was Rs. 225 which was about a discount of 6.7 percent, however, the stock price declined 4.6 percent on the 8th of June due to the open offer announcement.
Coal India Limited
Coal India Limited is an Indian Central Public Sector undertaking owned by the Ministry of Coal and the Government of India whose headquarters are in Kolkata, West Bengal. Being the largest Government owned coal producer globally, it contributes around 82 percent of the total coal production in India. The importance of Coal India Limited for the Indian economy is immeasurable and it has been recognized as one of the Maharatnas of India by the Government of India. The operations of this entity are controlled by the Ministry of Coal and it is generally accepted as the 8th most valuable and profitable company in the Indian Economy. Coal India has certainly established outreach widely, and has 83 mining areas in 8 states of India.
This company has a history and reputation for being profitable and it has established itself in the global market as well. The first time Coal India had a public share offering, it was in October 2010, and it offered 10 percent of its equity shares at a floor price of Rs. 245 per share. In January 2015 Coal India had an Offer for Sale that fetched the largest equity offering in the Indian market with the total sale being Rs. 22,557.63 crores at the share price of Rs. 358 per share.
Coal India Offer for Sale (OFS)
Coal India OFS opened subscriptions on the 2nd of June for retail investors, and on the 1st of June for nonretail investors. There was an over-subscription of 345 percent which signifies how in demand this OFS was. After this OFS the Government of India now holds around 63 percent stake of Coal India. While this OFS was going on, Coal India increased a whopping 8 percent in the price of coking coal on the 6th of June. The government was initially planning to sell only 1.5 percent stake of the company but ended up selling another 1.5 percent which rounded up to be total to be 3 percent. This OFS is in line with the government’s plan of divesting its stake in the public sector.
Even though the buyers of the shares are not known, the platforms that conducted the sale are quite well known. Some of the major sellers were Axis Bank, JM Financials, ICICI Securities, SBI Caps, Kotak Mahindra Bank, and other significant investment banks.
Is it a good investment opportunity?
So, what does this signify for regular citizens looking for lucrative investment opportunities?
The opinion of investment experts varies. While some are still unsure of the outcome most agree that this is a very lucrative buying opportunity for investors and anytime the share price falls like this it is always a green signal to invest. Furthermore, Coal India Limited is a company that is reliable and stable and the growing demand of the power industry and rural electrification is sure to give the demand for coal a boost. In India, around 70 to 75 percent of the total power is generated through thermal power, and of the total coal production 80 to 85 percent is supplied to the power generation industries, this signifies just how lucrative this coal investment opportunity is. Coal India Limited being the largest supplier of thermal coal to the power generation industry, its first major investment opportunity of this financial year, is a memorable event.
Written by: Sangeeta Behera
Edited by: Labdhi Shah
