Many years ago I had done an analysis on IPOs of 2010 and also had discussed Coal India as part of the list. See - "IPOs of 2010 - A Reflection"
A few facts of the Coal India IPO.
- Discovered price after closure of book-building - Rs. 245.00
- Listing Date: November 4, 2010
- Closing price on day of listing: Rs. 342.35
- % Return on day of listing: 39.73%
- Issue was oversubscribed by 15 times.
Since the day of listing and till Jan 29, 2015 the company has given dividend 7 times for a total of Rs. 569/-. Please remember the share price falls (at the minimum) to the extent of the dividend paid on the ex-dividend date.
Today's Offer for Sale (OFS) was oversubscribed at 1.1 times at the base price of Rs. 358/-. Taking the closing price from the day of listing and the base price, the annualized gain (across the 4 years) is 1.14%.
I have considered the closing price on listing day as that is the 'discovered price' after the stock has gone through the gyrations of the stock market. The price of a share in the stock market takes into account many factors and hence is a more accurate reflection of the true value of the stock than what merchant bankers decide during an IPO / FPO / OFS.
So here are my inferences:
- Despite the coal shortage in the country and the monopoly Coal India enjoys, its output has not increased substantially since the time of its IPO. If it had, the share price should have been much higher today.
- OFS route is the quickest route to sell shares. In the last few years, instead of "Follow-on Public Offer" (FPO), the government (in order to meet its disinvestment targets) has been using OFS route.
- Why the OFS route? The government can coerce its other companies (like LIC, SBI, etc.) to buy the shares and ensure the OFS is successful.
- Coal India was trading at Rs. 394/- on Jan 27, 2015, a day before the OFS date was announced, a drop of 10% in 3 trading days.
OFS is a route where the promoter is trying to offload his holdings to make a quick buck. The share price will fall slightly more in the following week when the shares are allotted to the people who subscribed to the issue. It could be a better opportunity to buy the share then!
If a company has great prospects, then the promoter should be either using the cash reserves to expand capacities or perhaps doing a buy-back if the share price does not reflect the true value of its future business.
Paying huge dividends, FPOs, OFS, etc. especially by Government companies is to just find a way to generate revenue to meet their budgetary targets and in turn window dress the fiscal deficit. :-)
A few facts of the Coal India IPO.
- Discovered price after closure of book-building - Rs. 245.00
- Listing Date: November 4, 2010
- Closing price on day of listing: Rs. 342.35
- % Return on day of listing: 39.73%
- Issue was oversubscribed by 15 times.
Since the day of listing and till Jan 29, 2015 the company has given dividend 7 times for a total of Rs. 569/-. Please remember the share price falls (at the minimum) to the extent of the dividend paid on the ex-dividend date.
Today's Offer for Sale (OFS) was oversubscribed at 1.1 times at the base price of Rs. 358/-. Taking the closing price from the day of listing and the base price, the annualized gain (across the 4 years) is 1.14%.
I have considered the closing price on listing day as that is the 'discovered price' after the stock has gone through the gyrations of the stock market. The price of a share in the stock market takes into account many factors and hence is a more accurate reflection of the true value of the stock than what merchant bankers decide during an IPO / FPO / OFS.
So here are my inferences:
- Despite the coal shortage in the country and the monopoly Coal India enjoys, its output has not increased substantially since the time of its IPO. If it had, the share price should have been much higher today.
- OFS route is the quickest route to sell shares. In the last few years, instead of "Follow-on Public Offer" (FPO), the government (in order to meet its disinvestment targets) has been using OFS route.
- Why the OFS route? The government can coerce its other companies (like LIC, SBI, etc.) to buy the shares and ensure the OFS is successful.
- Coal India was trading at Rs. 394/- on Jan 27, 2015, a day before the OFS date was announced, a drop of 10% in 3 trading days.
OFS is a route where the promoter is trying to offload his holdings to make a quick buck. The share price will fall slightly more in the following week when the shares are allotted to the people who subscribed to the issue. It could be a better opportunity to buy the share then!
If a company has great prospects, then the promoter should be either using the cash reserves to expand capacities or perhaps doing a buy-back if the share price does not reflect the true value of its future business.
Paying huge dividends, FPOs, OFS, etc. especially by Government companies is to just find a way to generate revenue to meet their budgetary targets and in turn window dress the fiscal deficit. :-)
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