The fireworks are expected to begin on Novem-ber 4, a day before Diwali, for retail investors who have applied for Coal India’s mega initial public offer (IPO).
Retail subscribers will get a little less than half of the shares that they had applied for, as this portion was subscribed 2.3 times. Effectively, at least 173 shares will be allotted on full quota of application. The good news is that each of them may get another 10-15 shares from the employee quota, which was subscribed 0.10 times.
Over 60 million shares were reserved for employees. No bids were received for 54 million. Over 18.9 million shares will go to retail investors by the 35 per cent reservation methodology.
The allotment in Coal India (CIL) will thus be way higher than that of the Reliance Power issue in 2008, when investors got 17 shares against full application of 222 shares. The retail category in R-Power, which saw a poor listing, was subscribed over 13 times. CIL received 1.6 million retail applications, against R-Power's over 4.5 million.
| BLACK DIAMONDS |
| * Retail investors to get a little less than half of the number of shares they have applied for |
| * At least 173 shares to be allotted on full quota of application |
| * Each of them may get another 10-15 shares from employee quota |
| * Investors may make around Rs 40 on each share |
| * If sold on first day of listing, gains to be around Rs 7,000 an application |
Going by the Rs 30-35 grey market premium of CIL, the shares are likely to be listed at Rs 270-Rs 280 against the upper end of the price band of Rs 245. Add to this a 5 per cent discount to the category and retail investors will make Rs 40 on each share, if they decide to sell the shares on first day. This translates to gains of Rs 7,000 an application. A Mumbai-based broker said retail investors may get what they had been waiting for: Listing gains. The pricing has been fair, which is why the premiums in the grey market are not falling after the issue closed. Normally, premiums decline when an issue closes as investment bankers generate hype for the issue to get subscribed. Till date, over 300 million shares of CIL have been traded in the grey market, generating a turnover between Rs 1,000 and Rs 1,200 crore.
Stock brokers believe flipping of CIL shares will be high on November 4, when the issue lists. "A large number of CIL shares will change hands. Most retail applications were pre-contracted by merchant bankers or brokers, who were looking to corner the IPO for large institutions," said a Mumbai broker.
Brokers were renting demat accounts of retail investors for Rs 500-Rs 700 to corner the IPO.
The fight for a larger pie of CIL, the world's largest coal producer, was intense among top institutions, which was why the qualified institutional buyers portion saw subscription worth Rs 1.81 lakh crore for the IPO of over Rs 15,400 crore. The portion was subscribed 24.7 times and received 770 applications. The high net worth individuals category was subscribed 25 times.
