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CIL in big-bang listing

business Updated: Nov 05, 2010 01:04 IST
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Coal India Ltd, the world’s largest coal producer, got off to a stellar start at the Bombay Stock Exchange on Thursday, emerging as the fifth-largest company in the country within an hour of opening trade. It closed even stronger as the fourth-largest with a market capitalisation of Rs 2,16,240 crore.

CIL is now the third public sector firm in the top five companies, and is well ahead of more fancied private sector companies like Infosys, Tata Consultancy Services, Larsen and Toubro, ICICI, NTPC and ITC.

Riding on the super success of the firm’s listing, the Bombay Stock Exchange benchmark Sensex closed the day at 20,894, its best ever closing and a 2% rise over its previous closing.

CIL’s scrip ended its first day on BSE at Rs 342.35 per share, a 40% premium over its issue price of Rs 245 per share. The issue, the biggest in the country so far, has generated Rs 15,200 crore for the exchequer.

“Nobody thought a government-owned coal mining company operating out of the eastern part of the country can actually be so big,” said Partha S Bhattacharya, chairman and managing director, Coal India Ltd. “The fundamentals of the company are very strong and so is its management. The superlative investor response is only a reiteration of that.”

Those from outside the company recognised the value of the firm more than those inside it.

Unlike the IPO, where subscription was low on first day but gathered steam gradually to end at 15-fold demand, trading in the stock started with a bang. The stock opened at R287.8, up 17.4% from the issue price, touched a high of R344.8 before settling at R342. The average trading price of the CIL stock, in which the government now holds a 90% stake, was R327.8.

It also mirrored the global trend where firms dealing in commodities are more profitable and better valued than those involved in making consumer oriented products. Mining companies therefore enjoy better profitability than steelmakers and even those that have integrated operations.

“The whole event has appeared to be a fairy tale,” said Jagannadham Thunuguntla, strategist and head of research, SMC global securities. “Be it the quality of the company, pricing of the issue, wide subscription and super impressive listing, all has fallen perfectly into place.”