With the markets in the middle of a bull run, state-owned Coal India Ltd (CIL) has decided not to rope in any anchor investor for its upcoming initial public offer (IPO) expected to be the biggest in the country so far. The decision was taken as the government felt the demand for the PSU’s shares would be very high and the presence of anchor investors will lower the transparency of the selection process.
Speculation over such a move has been rife for quite some time and CIL Chairman Partha S Bhattacharyya said recently that the lack of an anchor investor was unlikely to impact the firm’s valuation as interest from investors was very high.
“As a PSU, it is very important to undertake every step with utmost transparency and with the markets looking up and response from investors very encouraging, it was felt that there would be no need for anchor investors,” said a senior government official.
CIL had reserved 30 per cent quota in the qualified institutional buyer (QIB) segment for anchor investors, which would now be dropped. Anchor investors buy shares of a company before the launch of the public issue as a confidence building measure and often come in handy in cases when the markets are choppy and there is a risk of an IPO receiving tepid response from investors.
Anchor investors, who cannot be promoters of the issuer company, can be allocated as much as 30 per cent of the portion reserved for QIBs. Such investors must bid for at least R10 crore worth of shares.
The CIL IPO is expected to rake in between R14,000 crore and R16,000 crore for the government, making it the biggest IPO to have ever hit the market. The offer for 63 crore (630 million) shares, translating to 10 per cent equity in the company, would open on October 18 and the price band will be finalised on October 12.