The government’s offering of 10 per cent of its equity in Coal India Ltd, which was the largest equity offering ever, received Rs 22,400 crore, marginally more than what it expected. This is good news but there is a rider since the state-owned LIC invested Rs 10,000 crore whilst another Rs 1,000 crore was subscribed by General Insurance Corporation and the State Bank of India, among other state-owned entities.
That the sale offer came without much warning, and was on for only a few hours on Friday, could perhaps be one of the reasons for institutions and retail players not coming in larger numbers. Retail investors had to offload their shares in other stocks, like banking, to subscribe to the Coal India offer, and this crashed the stock markets on Friday.
The government has a disinvestment target of Rs 43,425 crore in 2014-15 and there are barely two months left. So, whilst the Rs 22,400 crore will certainly help, it will be a huge challenge for the government to mop up a similar amount by March 31.
It has other offerings in the pipeline and will also be competing with several other major private companies that are coming to the market to raise money. But its compulsions for meeting its fiscal deficit target seem to be an overriding factor. The markets are generally bullish. Also, unlike private companies, the government’s offers are always more generous, as in the case of Coal India where retail investors were offered a discount of five per cent.
