India’s power sector matures as China consolidates
August 11, 2010

As China quietly closes 2,087 steel mills, cement works and other energy-intensive factories by Sept. 30 in a bid to move up the energy value chain, India too is testing her metal. New Delhi plans to put 10 percent of state-owned coal mining company Coal India on the bourses by October and to sell a 5 percent stake in its national oil company Oil and Natural Gas Corporation for up to Rs130 billion.

Coal India which has filed their Draft Red Herring Prospectus with the market regulator, the Securities and Exchange Board of India earlier this week is expected to be India’s biggest initial public offering at Rs150 billion (US$3 billion). Until now, India’s largest equity offering this year was from National Mineral Development, the state-owned mining company, with a follow-on stock sale of US$2.2 billion. Reliance Power headed by billionaire Anil Ambani had in 2008 listed for US$3 billion. More recently China’s Agricultural Bank listed on the Shanghai and Hong Kong stock exchanges as the world’s highest dual listing at US22.1 billion, beating Industrial and Commercial Bank of China’s US$21.9 billion offering in 2006 to become the world’s seventh largest lender by market vale.

“The power sector is going to be the next success story, as the telecom story was a few years back,” Arvind Mahajan, head of natural resources at KPMG in Mumbai told the Financial Times. “Coal India will be an important player in that story.”

At the beginning of the fiscal year in April this year, the Indian government had announced plans to divest a significant stake in public sector units in order to raise money, reduce the nations fiscal deficit and enable these companies to be more efficiently run. This year, Indian companies have sold US$17.5 billion shares in 93 deals, the highest value since 2007 when they offered US$22.8 billion shares in IPOs, according to Dealogic, the data company. This year’s total makes India the second highest issuer of shares among emerging economies after China, whose companies have issued stock worth US$85.5 billion.

Coal India claims to be the largest coal producer in the world, accounting for 85 per cent of Indian output. India has the world’s fourth largest coal reserves. Coal India reported net profit of Rs83.12 billion in the fiscal year ending March, 2010.


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