Shares in state-run Coal India soared nearly 40 percent on their first day of trading on the Mumbai stock market yesterday as investors scrambled to invest in the world’s biggest coal miner. The sale of a 10 percent stake in Kolkata-based Coal India last month was the biggest share sale in Indian history and banked the government US3.4 billion.
The shares jumped to 340 rupees in morning trade, up 38.7 percent from the issue price of 245 rupees, handing those able to buy in the initial public offering (IPO) a handsome profit on paper.
The strong debut bodes well for other part-privatizations in India, where the government has an ambitious divestment program entailing sales of chunks of strategic state-owned firms.
“This beats our expectations. A 40 percent premium is a strong performance,” said Paresh Jain, metals and mining analyst with Mumbai-based Angel Broking.
The group is the world’s largest coal miner, producing over 80 percent of India’s coal at 471 mines across eight states.
It also holds the largest extractable coal reserves in the world with over 22 billion tonnes, ahead of rivals China Shenhua Energy and the world’s largest private miner, Peabody Energy in the US.
Coal currently accounts for more than half of India’s energy use and consumption is set to increase as the country’s economic development accelerates in energy-intensive sectors such as steel and cement manufacturing.
India’s demand for coal has outstripped domestic supply, resulting in a 20 percent rise in imports each year since 2005.
“Coal India is well placed to benefit from its dominant position in the Indian coal mining sector,” investment house Motilal Oswal said in a note to clients.
However, the brokerage added that the company faced many challenges, including delivery bottlenecks caused by India’s ramshackle infrastructure and a left-wing insurgency in many areas where its reserves are located.
“This is the culmination of a landmark deal and the birth of Coal India at the stock market,” Partha Bhattacharya, chairman of the firm, said at a ceremony marking the first day of trading.
Demand for the first shares issued by the company last month was strong, with financial institutions bidding for 24.7 times the shares on offer to them. Small investors bid for more than twice the shares allocated to them.
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