Tuesday, October 26, 2010

Coal India IPO Price Finalized

In my previous article on the Coal India IPO I had elaborated about this
humongous IPO given out by the government of india and the details of the same.

If you recollect, the offer price band was Rs. 225 – 245 per share. The IPO received a
magnificent response from investors and was totally oversubscribed 15.28 times. (i.e.,
for every 1 share available for sale, there are 15.28 people willing to buy it)

Because of the overwhelming response, the offer price has been fixed at the higher
end of the price band i.e., Rs. 245 per share. Of course, retail investors will get an
extra 5% discount on the price that is Rs. 12 per share, so the price we would be
getting the shares (if you subscribed and got shares allotted) is Rs. 233/-

Oversubscription Details:

Though the IPO was overall oversubscribed 15.28 times, a major chunk of it was from
QIBs and NIIs followed by retail investors.

QIB’ s – 24.7 times
NII’ s – 25.4 times
Retail Investors – 2.31 times

Undersubscription Details:
The company had reserved 63,163,644 equity shares (nearly 10%) of the issue for its
employees. Amid fears of privatization of the CIL, it received a stone cold response
from its employees. This section was subscribed only 0.1% which means that 99.9%
of the shares in this section were not subscribed.

By now, you are mumbling, what about the employee’ s portion of the shares which is
subscribed only 0.1 times. My dear reader, yesterday there was also a press release by
the authorities. They confirmed that the undersubscribed shares from the employees
portion would be shared in the ratio of 50:35:15 between QIB’ s, Retail and HNI’ s.

i.e., if 100 shares are available from the employees quota, 50 would be allotted to
QIB’ s, 35 to retail investors and the remaining 15 to HNI’ s.

Note: The chances of retail investors getting shares allotted is very high. Majority
of people who subscribed @ Rs. 245 per share would be allotted shares because the
retail investors section is oversubscribed only 2.31 times and also a majority of the
investors would not have bid at the higher price band and would have stuck to the
lower band of Rs. 225 or nearer amounts. Plus there is this extra shares available from
the employees Quota. So, the chances of us getting shares allotted is significantly
high. Lets keep our fingers crossed.

Happy investing!!!

Terms used in this article:

QIB – Qualified Institutional Buyer
HNI – High Networth Individual
CIL – Coal India Ltd
NII – Non Institutional Investors

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