The government floated an offer for sale (OFS) to sell up to 9, 244, 0924 shares, representing 1.50% of total paid-up equity, as a base offer on June 1, 2023. In the case of oversubscription, the offer includes a chance to sell an extra 9, 244, 0924 shares, or 1.5%, as a green shoe option. The offer was open for Non-retail investors on June 1, 2023. Coal India OFS be available to retail investors the next day, on Friday, June 2, 2023.

The OFS had a massive response from institutional (non-retail) investors, with the basic issue size receiving 3.46 times the subscription on the first day. On June 1, the government received offers from institutional investors for 287.6 million shares, compared to total offer of 184.8 million shares.

The government proposes to sell about 18.48 billion shares (9, 244, 0924 + 9, 244, 0924) or 3% of the coal producer at a floor price of Rs 225 per share, a 7% discount from the May 31 closing price. The government would fetch around Rs 4,000 crore from the transaction. The government owns 66.13% of the company. Following the divestiture, the government's stake in CIL will be reduced to 63.13 percent.

Coal India estimates a capex of Rs 60,000 crore over four years to achieve a 1 btpa target.

Coal India Offer for sale will help the government in meeting its current fiscal (FY23) disinvestment objective, which is 21% lower at Rs. 51,000 cr compared to Rs. 65,000 cr the previous year. Thermal power generation in India accounts for 70-75% of overall production, with Coal India providing 75-80% of the total coal supply. Coal India was trading in green at Rs. 232 at the time of publication.

We anticipate around 9.6% and a 17% CAGR in revenue and bottom line by FY22-25E, based on EBITDA/ Enterprise. We value Coal India at Rs 295 per share using DCF,  Hence clients are advised to participate in this OFS.