The date is 18th October, 2010, India will witness the largest fund rising ever in the history of the country s investment industry. The central public sector enterprise, and a coal miner, having the world s largest coal reserves, Coal India Ltd will go for the public offering of the company s equities to raise in excess to Rs.15,000 crore.
The issue is not only the big catch for the investors in the India Inc but also it holds much importance for the government s disinvestment plans to raise Rs.40,000 crore by the end of the fiscal 2010-11.
The market has already set the mood for the investors as the buoyancy seems to have returned in the markets. The benchmark index, Sensex has surged to make a recent high as it crossed 20,000 mark. Some of the industry experts consider it as a booster for the overall market recovery.
The buoyancy is attributed to the large-scale fund raising programme by the union government under the divestment plan. Last year, the government had raised Rs.25,000 crore, by public offering of PSU majors like Oil India, NMDC, REC and NTPC.
However, this year so far it has reached to halfway of the total Rs.40,000 crore fund raising plan. Lined up for the second half of the fiscal are majors including ONGC, IOC, SAIL, Hindustan Copper Ltd, Shipping Corporation of India and Manganese Ore India etc.
The government and investors both are betting high on the IPO, not as the volume of fund raising is huge, but also the company s competitiveness and its key position in the coal mining sector across the world makes it a most favourite destination to make long term investments, that can yield great returns for the investors.
The demand for non-coking coal, one of the key areas of Coal India s operations, is expected to increase in the power sector at a CAGR of 11.3% between fiscal 2009 and 2014.
Coal is the dominant source of energy and met 52.4%, while oil and natural gas met approximately 41.6% of the total primary energy requirement of India in fiscal 2009.
Further, in India, during fiscal 2009, the non-coking coal off-take to the power sector was approximately 77.0% for electricity generation, a CRISIL report noted.
As per the projections given by the Planning Commission of the Government of India, coal is projected to meet over 50.0 % of the primary commercial energy requirement by fiscal 2032. Known coal reserves are projected to last for over 80 years at the 2006 levels of production.
This creates huge potential for Coal India s future earnings as the company produces about 81% of the total coal produced in the country.
According to CRISIL s outlook on Coal, the total capacity addition in the power sector during fiscal 2011 and 2014 will be approximately 66 GW, of which coal based capacity additions are expected to be approximately 52 GW, which will take the total capacity of coal based power plants in India to approximately 130 GW by fiscal 2014.
As a result of the high demand for coal in the thermal power and iron and steel industries, demand for non-coking coal in India is expected to increase at a rate of 11.3% from 508 million tons in fiscal 2009 to approximately 868 million tons in fiscal 2014, while the demand for coking coal is likely to increase at the rate of 9.7% in the same period.
The low cost of power generation using coal and the availability of huge coal reserves in India are the major incentives for setting up coal-based power plants.
The company has huge expansion prospects as it will expand its raw coal production capacities. As per the company s red herring prospectus, as of March 31, 2010, 45 projects, comprising 22 capacity expansion projects for existing mines and 23 new mine projects had received relevant investment approval and were in various stages of mine planning and development.
Further, it has 25 projects, with an aggregate estimated capacity of 47.51 million tonnes per annum were at various stages of implementation and are expected to become operational by the end of fiscal 2012; and 20 longer gestation projects, with an aggregate estimated capacity of 33.27 million tonnes per annum, are expected to become operational during the 12th Five Year Plan period (2013-2018).
The largest coal reserve holder in the world, Coal India had a total of 18,862.9 million tonnes of total reserves, comprising 10,595.1 million tonnes of Proved Reserves and 8,267.8 million tons of Probable Reserves, respectively, and a total of 64,218.0 million tonns of Total Resources, comprising 51,326.3 million tons, 9,924.4 million tons and 2,967.3 million tons of Measured Resources, Indicated Resources and Inferred Resources, respectively, as of April 1, 2010, the company document said.
The company has recently undertaken various initiatives for the acquisition of coal assets outside India and has acquired prospecting licenses for two coal blocks in Mozambique.
Speaking from the point of view of investors, the proposed price-band of Rs.225-245 seems much attractive for the retail investors as well. The issue is expected to raise between Rs.14,200 crore and Rs.15,475 crore.
With a view to attract larger public participation for the IPO, the government has also offered 5% discount to the retail bidders in the offer price.
So far during the current fiscal, the government has raised Rs.2,000 crore from a sale in Satluj Jal Vidyut Nigam Limited and Engineers India Limited (EIL).
With markets hovering at the buoyant levels and monsoon creating positive outlook for a better crop scenario, the economic fundamentals seem to be more conducive for the markets.
In a recent analysis, the economic think-tank, Centre for Monitoring Indian Economy (CMIE) had noted that the growth for the current fiscal will hover above 9%. This further strengthens economic outlook for the country, thereby giving positive indications for the investors.
Many in the industry consider Coal India IPO as a chance to get golden returns in the long run. Then, why not invest in this black gold?
The issue is not only the big catch for the investors in the India Inc but also it holds much importance for the government s disinvestment plans to raise Rs.40,000 crore by the end of the fiscal 2010-11.
The market has already set the mood for the investors as the buoyancy seems to have returned in the markets. The benchmark index, Sensex has surged to make a recent high as it crossed 20,000 mark. Some of the industry experts consider it as a booster for the overall market recovery.
The buoyancy is attributed to the large-scale fund raising programme by the union government under the divestment plan. Last year, the government had raised Rs.25,000 crore, by public offering of PSU majors like Oil India, NMDC, REC and NTPC.
However, this year so far it has reached to halfway of the total Rs.40,000 crore fund raising plan. Lined up for the second half of the fiscal are majors including ONGC, IOC, SAIL, Hindustan Copper Ltd, Shipping Corporation of India and Manganese Ore India etc.
The government and investors both are betting high on the IPO, not as the volume of fund raising is huge, but also the company s competitiveness and its key position in the coal mining sector across the world makes it a most favourite destination to make long term investments, that can yield great returns for the investors.
The demand for non-coking coal, one of the key areas of Coal India s operations, is expected to increase in the power sector at a CAGR of 11.3% between fiscal 2009 and 2014.
Coal is the dominant source of energy and met 52.4%, while oil and natural gas met approximately 41.6% of the total primary energy requirement of India in fiscal 2009.
Further, in India, during fiscal 2009, the non-coking coal off-take to the power sector was approximately 77.0% for electricity generation, a CRISIL report noted.
As per the projections given by the Planning Commission of the Government of India, coal is projected to meet over 50.0 % of the primary commercial energy requirement by fiscal 2032. Known coal reserves are projected to last for over 80 years at the 2006 levels of production.
This creates huge potential for Coal India s future earnings as the company produces about 81% of the total coal produced in the country.
According to CRISIL s outlook on Coal, the total capacity addition in the power sector during fiscal 2011 and 2014 will be approximately 66 GW, of which coal based capacity additions are expected to be approximately 52 GW, which will take the total capacity of coal based power plants in India to approximately 130 GW by fiscal 2014.
As a result of the high demand for coal in the thermal power and iron and steel industries, demand for non-coking coal in India is expected to increase at a rate of 11.3% from 508 million tons in fiscal 2009 to approximately 868 million tons in fiscal 2014, while the demand for coking coal is likely to increase at the rate of 9.7% in the same period.
The low cost of power generation using coal and the availability of huge coal reserves in India are the major incentives for setting up coal-based power plants.
The company has huge expansion prospects as it will expand its raw coal production capacities. As per the company s red herring prospectus, as of March 31, 2010, 45 projects, comprising 22 capacity expansion projects for existing mines and 23 new mine projects had received relevant investment approval and were in various stages of mine planning and development.
Further, it has 25 projects, with an aggregate estimated capacity of 47.51 million tonnes per annum were at various stages of implementation and are expected to become operational by the end of fiscal 2012; and 20 longer gestation projects, with an aggregate estimated capacity of 33.27 million tonnes per annum, are expected to become operational during the 12th Five Year Plan period (2013-2018).
The largest coal reserve holder in the world, Coal India had a total of 18,862.9 million tonnes of total reserves, comprising 10,595.1 million tonnes of Proved Reserves and 8,267.8 million tons of Probable Reserves, respectively, and a total of 64,218.0 million tonns of Total Resources, comprising 51,326.3 million tons, 9,924.4 million tons and 2,967.3 million tons of Measured Resources, Indicated Resources and Inferred Resources, respectively, as of April 1, 2010, the company document said.
The company has recently undertaken various initiatives for the acquisition of coal assets outside India and has acquired prospecting licenses for two coal blocks in Mozambique.
Speaking from the point of view of investors, the proposed price-band of Rs.225-245 seems much attractive for the retail investors as well. The issue is expected to raise between Rs.14,200 crore and Rs.15,475 crore.
With a view to attract larger public participation for the IPO, the government has also offered 5% discount to the retail bidders in the offer price.
So far during the current fiscal, the government has raised Rs.2,000 crore from a sale in Satluj Jal Vidyut Nigam Limited and Engineers India Limited (EIL).
With markets hovering at the buoyant levels and monsoon creating positive outlook for a better crop scenario, the economic fundamentals seem to be more conducive for the markets.
In a recent analysis, the economic think-tank, Centre for Monitoring Indian Economy (CMIE) had noted that the growth for the current fiscal will hover above 9%. This further strengthens economic outlook for the country, thereby giving positive indications for the investors.
Many in the industry consider Coal India IPO as a chance to get golden returns in the long run. Then, why not invest in this black gold?
