Coal turned into gold for 15.2 lakh investors on Thursday, a day before Lakshmi Pooja on Diwali. Coal India soared 40% to Rs 342.35 on debut, creating many records, the biggest initial public offering, biggest coal producer in the world, and top trading on debut.
The wealth created by the issue ensures that investors will remain enthusiastic in bidding for subsequent share sales from the government stable, if the pricing is attractive. Reliance Industries made a paper profit of Rs 106.9 crore, Wipro chairman Azim Premji Rs 13.36 crore and Hero Honda Rs 4.45 crore, rough calculations by ET show.
"The strong response demonstrates appetite for quality issues and top-notch companies, and is a strong vote of confidence in the public sector space," says Saurabh Sonthalia, head of global capital markets, Bank of America Merrill Lynch. "It is a vote of confidence in the privatisation plan."
Finance minister Pranab Mukherjee may surpass his targeted Rs 40,000-crore fund-raising this year through share sale in state-run companies. That would help him narrow fiscal deficit for the year, which has already been funded through one-off revenues from sale of spectrum for telecom services.
Power Grid's $1.9-billion issue opens Monday. Those of SAIL, Indian Oil, Oil & Natural Gas , Shipping Corporation , Hindustan Copper and Manganese Ore will follow.
Coal India raised Rs 15,200 crore from sale of 63.16 shares at Rs 245 apiece. Retail investors were sold shares at a 5% discount. The issue was subscribed 15 times the offer, with funds such as Janus Capital, Fidelity, Franklin Templeton and Capital International buying into it.
The performance surpassed the expectations of bankers to the issue, such as Uday Kotak, vice-chairman of Kotak Mahindra Bank , one of the book runners. With the gains, Coal India becomes the fourth most-valuable company on the Indian stock exchanges with a market value of Rs 2,16,241 crore, behind Reliance Industries, ONGC and State Bank of India .
Its shares contributed to more than half the total cash segment trading on the exchanges at Rs 22,204 crore, of the total Rs 40,376 crore, data from the exchanges show. "Everyone in the market chain—from the retail investor to the HNI, to the grey market investor and leverage investor—has made money on Coal India's debut," said Dharmesh Mehta, head-equities, Enam Securities.
After its stellar debut, the prospects of Coal India gaining further look bright as index managers may be compelled to add the stock, forcing many investors who track the indices to buy it. Speculation is that FTSE, which manages indices like FTSE 100, is likely to include Coal India in two of its global indices effective Friday. It may form part of the FTSE All-World Index and FTSE All-Emerging Index.
MSCI, another leading index provider, is also said to be considering the inclusion during its semi-annual index review on Wednesday. Global equity strategists suggested that as such MSCI is likely to include Coal India's stock into the MSCI India index from December 1, 2010, and in other indices like MSCI Asia-ex Japan after some time.
It may have to wait for three months before joining the Sen*** and Nifty, which stipulate a three-month track record for inclusion in the indices. Coal India could be an exception.