In a disclosure to the exchanges, public sector life insurer LIC of India has said that it has bought 28.47 crore shares, or a 4.51 per cent stake, in Coal India in the offer for sale on Friday.
Exchequer gets ₹22,558 cr At an indicative price or weighted average price of ₹358.49, LIC would have spent about ₹10,206 crore in the CIL disinvestment. Through the mega sale, the Government had mopped up ₹22,558 crore.
After the purchase, LIC’s stake in Coal India has increased to 7.24 per cent from 2.73 per cent, according to a disclosure to the BSE by CIL.
The government sold 63.16 crore shares, representing a 10 per cent stake in Coal India, through the offer for sale on January 30 while fixing the floor price at ₹358. The Centre’s stake in Coal India has now fallen to 79.65 per cent from 89.65 per cent.
Meanwhile, shares of CIL have slipped below the floor price fixed by the government. On Monday, the shares closed 1.65 per cent lower at ₹354.90, on the BSE..
Rules above retail offer Since retail investors were offered the benefit of 5 per cent discount to the bid price entered by them, the stock may still be quoting at a price higher than the price at which they would be allocated shares.
In the offer, 20 per cent of the sale size was reserved for retail investors, that is, individual investors who place bids up to ₹2 lakh. Though the retail portion of the share sale was under-subscribed, they still bid for 5.56 crore shares.
K Annamalai, promoter of Annamalai Capital Services, Coimbatore, and a former President of the Coimbatore Stock Exchange, said individual investors, who had invested in the new offer of CIL, would gain from the price difference between the acquisition price and the prevailing market price. But he cautioned that the market euphoria and the fundamentals of the economy did not match.
He felt that there was room for a significant correction in the market and stock prices would seek lower levels once the correction sets in.
PSU disinvestment It would be prudent for investors, at least in the short term, to wait for the correction before they picked up shares, though the long-term prospects of the market looked reassuring.
Annamalai pointed out that the government has planned disinvestment in a number of blue-chip PSUs and retail investors may continue to be offered shares at a marginal discount to the floor price.
But he advised investors to wait for the post-offer period to invest in those companies in view of market uncertainty and as the difference between the market price and the offer price may not be significant.