Coal India’s ₹4,000 crore offer for sale subscribed 4x times

• As per BSE data, the non-retail part of the offer for sale was subscribed 2.7 times.
  
  
• The retail portion of the sale which opened on Friday was subscribed 1.4 times.
  
  
• The sale also included a greenshoe option of 1.5% in case of oversubscription.
  

Coal India’s offer-for-sale was subscribed four times over on the second and last day of the sale. As per BSE data, the non-retail part of the sale was subscribed 2.7 times, while retail portion was subscribed 1.4 times.

The government had planned to raise as much as ₹4,000 crore, by selling upto 3% stake in the company. The sale also included a greenshoe option of 1.5% in case of oversubscription.

The institutional portion of the sale was oversubscribed on the first day ie. Thursday itself, and the retail portion which opened on Friday was also fully subscribed.

The promoter of the company – the government said on Wednesday that it will sell some of its stake in Coal India via an OFS. The floor price for OFS was set at ₹225 per share, at a 7% discount to the current market price.

The government holds 66.13% stake in the company.

Coal India’s stock fell over 4% on the first day of the sale on Thursday. But on Friday, it traded flat as it gained over 0.15% to close at ₹230.9 per share, as per BSE data.

Price hike to cushion the wage hike hit

The company recently said that its board of directors approved a price hike of 8% on higher grade coal. According to a report by ICICI Securities, it can translate into a benefit of ₹2,703 crore for the remaining part of FY24.

Analysts say that this price hike move will help some of the hit that it will take due to a wage hike. The wage hike bill accounts to around ₹6,000 crore. This price hike can soften the wage hike hit by at least 50%, say analysts at ICICI Securities.

The company took a price hike in 2018, and analysts say that it won’t be able to raise prices in the near future. “More such increases are unlikely in the near term, considering the inflationary environment and upcoming elections,” says a Motilal Oswal report, reiterating its ‘buy’ rating on the stock with a revised target price of ₹290.

ICICI Securities believes some of the incremental earnings would be distributed as dividend, further sweetening the 9% expected dividend yield over the next two financial years.

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