Mumbai: State-run Coal India on Monday opened the order book for a $3.5 billion initial public offering that is on track to be the country's largest and was expected to generate heavy investor demand.
After about two hours, the offering had attracted more than $450 million in orders, or 0.13 times the shares on offer, with most bids at the top of a 225 to 245 rupees per share price range, according to stock exchange data.
Large IPOs in India typically see the heaviest subscription towards the close of the offering. Coal India's IPO closes on Wednesday for institutional investors and Thursday for retail investors.
"We will find a surge in applications tomorrow onwards from institutions and high net worth investors," said Arun Kejriwal, director at Mumbai-based research firm KRIS, who expects the offer to be more than 10 times covered.
The government is selling 631.6 million shares, or a 10 percent stake, in the world's largest coal miner, part of India's broader effort to divest stakes in roughly 60 companies in the next few years.
If priced at the top of its IPO range, Coal India would have a market value of $35 billion, ranking it seventh among listed Indian companies. It would surpass Reliance Power's $3 billion listing in 2008 as India's largest new issue.
A Reuters poll of fund managers last week had expected strong interest in the offer around an estimated price of around 250 rupees a share, given the miner's dominant market position and attractive valuations.
Coal India, based in Kolkata, produced 431 million tonnes in 2009/10 and accounts for nearly 80 percent of coal output in Asia's third-largest economy.
At the top of its price range Coal India would be valued at 15.7 times trailing earnings.
The company made a net profit of 98.3 billion rupees ($2.2 billion) in 2010 fiscal year on revenue of 525.9 billion rupees. It expects profits to rise by a quarter this fiscal year, fuelled by growing demand for power in Asia's third-largest economy.
Brokerages have estimated that Coal India could see upside of roughly 30 percent from its IPO valuation range, and said Coal India deserves a premium to global peers due to lower earnings volatility, a large undeveloped resource base and potential to increase prices.
China's Shenhua Energy, Coal India's closest rival, trades at 16 times trailing earnings, while smaller Indonesian peer Adaro Energy has a ratio of 20 times. U.S. miner Peabody Energy trades at 25 times earnings.
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