Coal India Ltd. the world’s largest coal miner looks to raise US$3.5 billion as the Indian government disinvests 10 percent of the state company in India’s largest IPO today. Although surpassing billionaire Anil Ambani’s Reliance Power IPO at US$2.46 billion of January 2008, analysts claim that India’s performance in raising funds through IPO’s is lackluster as compared to other BRIC nations.
China followed by Brazil are the heavy weights here. While the Agricultural Bank of China, which listed on the Hong Kong and Shanghai bourses two months ago was the world’s largest initial public offering raising a whopping US$22.121 billion, Brazil’s Petrobras’ offering at US$70 billion created a new record for a follow-on offer. Other deals this year include South Korea’s Samsung Life Insurance Co, which listed for US$4.4 billion, China’s Huatai Securities for US$2.3 billion, Russia’s United Company Rusal for US$2.2 billion and Essar Energy, an Indian company, issued in the UK for US$1.9 billion.
Buoyed by China and Australia, companies from emerging economies in the Asia-Pacific region have raised over US$72 billion in initial sales this year, more than triple the amount in the same period in 2009, according to data compiled by Bloomberg. India’s share of global IPOs however stood at a meager 3.3 percent, above other developed markets such as Australia, Germany, South Korea, Italy and Russia.
“As a rule, the total capital raising should be 2-3 percent of the total market capital. By that standard, we should be doing US$32-25 billion. By the end of this calendar, we should be doing US$25 billion after the big government IPOs and Tata Motors QIP issue of US$700 million,” Donald D’Souza, president, investment banking at India Infoline told the Financial Chronical.
Nonetheless, Coal India’s IPO is supposed to be the biggest IPO in the world during the time period it is open for subscription. Buoyed by foreign funds and market optimism, the IPO is expected to be oversubscribed manifold.
The divestment is part of New Delhi’s plan to raise a record US$8.5 billion by March next year from selling sales in public companies, with the proceeds to be used for social programmes and reducing the budget deficit. Other state-run firms like Manganese Ore, Power Grid, Hindustan Copper and Steel Authority of India have plans for share sales by the year-end.