Will Coal India divestment hit the jackpot tomorrow for NDA Government?

IN ITS second major disinvestment push, the NDA government is all set to go for the biggest share sale ever by offloading up to 10 percent stake in Coal India on Friday, that is January 30. This will bring up to Rs 24,000 crore at current market prices. The floor or minimum sale price for the offer will be announced on January 29. The OFS will start from January 30.

However, the Centtre's move has not been welcomed...

by the trade unions. Earlier this month, trade unions in Coal India had gone on strike protesting against the stake sale.

In a joint statement, the coal ministry and trade unions said the proposed disinvestment was on the lines of Sebi guidelines that regulate the government's stake in a public sector company.

Centre will sell 315.8 million shares, or 5 percent stake, through an offer for sale, with an option to sell the same number of shares as a greenshoe option, Coal India said in a regulatory filing.

The move is likely to help the government meet half of the Rs 43,425-crore revenue target from stake sales in the public sector, if the entire 10 percent goes through.

On January 28 closing price of Rs 384.05 a share, a 10 percent stake sale in the world’s largest coal producer will raise Rs 24,257 crore.

This is the first share sale where the government has considerably reduced the time gap between the announcement of disinvestment and the date of the offer, in order to thwart the hammering down of shares by stock market players.

The government currently holds 89.65 percent stake in Coal India, which was listed through a record initial public offering (IPO) in October 2010, raising Rs 15,199 crore.

With only Rs 1,715 crore being raised this fiscal by divesting its stake in SAIL, the government is hoping to go aggressive by selling stakes in public sector firms to help meet its fiscal deficit target for the year ending March 31.

In a related development, oil minister Dharmendra Pradhan said on January 28 that the government would sell five percent stake in ONGC this fiscal even though falling global oil prices pose a challenge.

The ONGC disinvestment was to give the government at least Rs 15,000 crore.

To overcome the shortfall, it has lined up a host of companies including NMDC, Indian Oil Corporation (IOC), Bharat Heavy Electricals (BHEL), National Aluminium (Nalco) and Dredging Corporation (DCIL). Five per cent stake sales in PFC and REC are also on the cards.

For the Coal India stake sale, the government has doubled to 20 percent the quota reserved for retail investors, who can buy shares worth up to Rs 2 lakh in the share sale. They would also be given a 5 per cent discount to the bid price entered by them.

A minimum of 25 per cent of the Coal India issue would be reserved for mutual funds and insurance companies.