Chillin' out till it needs to be funded
India is finally continuing where it left off in January 2010 with the year’s divestment targets finally turning into reality starting with Coal India firming up plans tonight. Meanwhile the acquisition spree by Indian mining majors / energy infrastructure teams continues, with Reliance buying three Shale Gas Fields of a total of more than 402,000 acres for a total of $3.4 billion. Coal India itself had tried purchasing Appalachian mines in the US from PMCO with a war chest of its own $4 billion (set budget) As Reliance gets ready to drill 4000 new wells at the bottom of the pricing cycle for the fuel, Coal remains a scarce commodity, India importing 50 million tons in 2006/7/8. Adani bought some Australian mining interests last week in Coal.
FDI in the US has dropped to 14% since German RWE and Japanese Itochu quit in 2005, with BHP Billton, Rio tinto and Scottish Power the names to reckon with. India’s Coal India in the mean time intends to issue more than half a billion shares finally filing a Draft with the securities regulator for institutional placement and retail and targets a Rs 12000 Crores or nearly $2.5 billion from the sale of its 10% stake. Underwriters in the issue can expect to carry back some of their underwriting portion as mega issue appetite has fallen in India over the last 18-24 months. also investment banking fees and charges have dropped to INR 10 million for the entire team of 10 investment banks chosen for the issue in face of competition and the advisory income is not the main motivator for the team involved.
Interestingly NMDC that came earlier this year mopped up $2.1 billion from the IPO market in an earlier divestment in 2010 in the mining and resources field. MMTC in trading of commodities, NMDC and Coal India together account for much of India’s commodities and base metals trade with a combined turnover of INR 9 trillion or $20 billion
Coal India targets a production and sale of 462 million tonnes in FY2011, exceeding annual sales of $10 billion with current resources or INR 4.7 trillion and the import bill thru MMTC close to INR 4 Trillion. NMDC produces and sells around 33million tonnes of Iron ore from such nationally owned resources.
There have been no FY2010 reports from India’s ‘Navratnas’ and financials are as based on 2009 reports. Coal India profit in 2009 was a INR 50 billion on the INR 4700 illion turnover 😀
Here’s the breaking news posted at WSJ India on the Coal India proceeds
State-owned Coal India Ltd. Monday filed its draft offer document for a proposed $2.8 billion initial public offering, taking forward the process of the government’s largest divestment exercise.
The IPO, which is tipped to be the second largest in the Indian capital market after Reliance Power’s $2.9 billion offer in January 2008, comes at a time when the benchmark Sensex is up 4.7% year-to-date and has risen 14.6% over the past two months or so.
The company will offer close to 631.64 million shares in the issue.
Earlier, bankers involved in the transaction said the plan was to open the issue on Oct. 18 and close it three days later. The largest government share sale so far was the 99.30 billion rupees follow-on offer in NMDC Ltd. earlier in March.
The Department of Disinvestment in early May mandated six investment banks–Deutsche Bank AG, Morgan Stanley, Citigroup Inc., Enam Securities Pvt. Ltd., Bank of America Merrill Lynch and Kotak Mahindra Capital Co.–to manage the share sale.
The government plans to divest 10% of the country’s largest coal producer, which produces more than 80% of India’s coal requirements.
As of March 31, 2010 the miner operated 471 mines in 21 major coalfields across eight states in India, including 163 open cast mines, 273 underground mines and 35 mixed mines, data on its website said.
The Kolkata-headquartered company also operates 17 coal beneficiation facilities with an aggregate designed feedstock capacity of 39.40 million tons annually.
“There is likely to be good interest from foreign funds for this mega-share sale. Since it’s in the resources space and is likely to be given a market capitalization of over 1 trillion rupees ($21.78 billion), the reception should be positive, but it’s too early to take a call without knowing any issue details or pricing,” said independent investment advisor S.P. Tulsian.
Coal India received cabinet approval to proceed with the IPO on June 15 after initially targeting a launch by the end of July and a close before Aug. 12.
India’s federal government plans to raise up to 400 billion rupees by selling stakes in several state-run companies this fiscal year as it looks to obtain funds to spend on infrastructure and social welfare projects.
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