State-run Coal India Ltd (CIL) has decided against roping in anchor investors for its forthcoming mega initial public offer as the government feels the selection process may not be transparent.
"The government has decided to drop the anchor investor idea as demand will exceed limits and pro-rata allotment is not possible as in other class of investors, including QIBs," top sources told PTI.
"We have to be discretionary in choosing anchor investors. This is something which the government is not comfortable with as the process of selection of such investors may not be transparent," they said.
The government might find it difficult to explain why it selected one anchor investor over another, the sources said.
Consequently, there will be no 30 per cent quota reserved in the qualified institutional buyer (QIB) segment of CIL's IPO for anchor investors.
CIL chairman Partha S Bhattacharyya recently said that even if the anchor investor portion was dropped, it was unlikely to impact the valuation of the company, as interest from investors and demand for CIL shares was very high.
He had said the response from investors was overwhelming in major cities like London, Los Angeles, Sidney and Singapore.
Anchor investors are those investors who buy shares of the company before the launch of the public issue. The concept of anchor investors was approved by Sebi last year. Anchor investors, who cannot be a promoter of the issuer company, can be allocated as much as 30 per cent of the portion reserved for qualified institutional buyers. Such investors must bid for at least Rs 10 crore worth of shares.
The government expects to raise up to Rs 16,000 crore through the CIL IPO, billed as the country's largest issue ever.
Coal India had earlier said the IPO for 63 crore (630 million) shares, translating to 10 per cent equity in the company, would open on October 18.
The price band of the CIL IPO will be finalised on October 12.
