The government's 10 per cent stake sale in Coal India through an IPO, billed as India's biggest issue that could raise about Rs 15,000 crore, will be offered at a price band to investors, Parliament was informed on Monday.
"The government has decided to make a public offer for sale of 10 per cent equity of Coal India Ltd (CIL) out of the government's holding of 100 per cent through the process of book building," Coal Minister Sriprakash Jaiswal said in a written reply to the Rajya Sabha.
Under the book building process, investors are given a price band in which they can bid for the shares.
The government was criticised earlier for following the French auction route, under which investors bid above a fixed price to discover the value of the stock.
Industry observers had blamed policy makers for adopting French auction route in NMDC and NTPC issues, which they said failed to attract investors to the public offers.
CIL Chairman Partha S Bhattacharyya last week said the company's board would meet on August 5 to approve the draft regulatory papers (DRHP), to be filed with market regulator SEBI for the IPO which is scheduled between 18-21 October.
Elaborating on the equity dilution, Jaiswal said, "...the listing of shares of CIL on stock exchange would bring about transparency, accountability, public scrutiny and good corporate governance in the organisation. It would also unlock the true value of share of CIL."
Last month, the Union Cabinet had cleared the proposal to divest 10 per cent of the government's stake in the world's largest coal miner through an IPO. The Centre holds 100 per cent equity in the company. Sources said that Rs 12,000-15,000 crore could be raised through the IPO.
Anil Ambani Group firm Reliance Power's IPO in January, 2008, is the biggest IPO in India so far. RPower had raised Rs 11,500 crore through its IPO.
The government aims to raise Rs 40,000 crore through disinvestment of PSUs like SAIL, Coal India this fiscal.
Jaiswal said the proceeds of the disinvestment would go to the National Investment Fund, money from which would be used to part fund infrastructure programmes.