Subscribe to Coal India IPO, says KR Choksey

MUMBAI: KR Choksey has recommended investors to ‘Subscribe’ to the initial public offering of Coal India. The company will enter the primary market Monday to raise Rs 15000 via the IPO by offering 63.20 crore shares of face value Rs 10 each in the price band of Rs 225-245 per share.

“The demand for coal is expected to increase at 11.2% in coming four years on the back of thermal power plants being set up in the country. CIL has a dominant position in the Indian coal industry; it caters to 53% of India’s coal requirement. CIL enjoys low cost competitive advantage as compared to its peers since most of its mines are open cast mines and have low stripping ratios.

Along with strong cash generation and low cost advantage and strong financials, the company is all set to tap the growing demand for coal. On the back of strong fundamentals and healthy growth prospects recommend a SUBSCRIBE for the IPO,” the report said.
CIL was incorporated in 1973 and is wholly owned by the Government of India. It is the world’s largest coal company by production as well as reserves, having total coal production of 431.26 million tons per annum (as of 1 April 2010) and reserves of 18.86 billion tonnes.

The objective of the issue is to divest 10% of GoI Equity shares of CIL.