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The Dog & Pony Show

Team: Rambling Souls IMT Ghaziabad

Srikanth Kumar Konduri (konduri@aol.in) Saurabh Ashok Thadani (saurabhthadani@gmail.com)

Disinvestments in India
Govt. ownership in a PSU is transferred by sale of its invested equity, bond capital in that PSU Disinvestments in FY10-11 till date (02-Feb-2011)
PSU SJVN (IPO) EIL (FPO) CIL (IPO) Issue Price Rs. 26 Rs. 290 Rs. 245 Current Price Rs. 21.15 Rs. 282.55 Rs. 311.6 Amount Raised Rs. 1062 Cr Rs. 960 Cr Rs. 15199 Cr

PGCIL (FPO)
MOIL (IPO) SCI (FPO) PSB (IPO)

Rs. 90
Rs. 375 Rs. 140 Rs. 120

Rs. 95.5
Rs. 411.1 Rs. 114.2 Rs. 108.05

Rs. 3721 Cr
Rs. 1237 Cr Rs. 582 Cr Rs. 480 Cr

Objectives of Disinvestment
To fulfill budgetary requirements To bring in new capital, management, technology for modernization & expansion To cultivate healthy competition To reduce Fiscal deficit To improve overall economic efficiency To encourage wide share in ownership To improve public finances

Ways to Disinvest
Strategic Sale : Involves block transfer of shares and
transfer of management control to a strategic partner

Capital Market :
Offer for sale Fixed Price / Book Building : Public invitation to buy new or existing securities Secondary Market / Private Placement : Sale of securities to a relatively small number of select investors

The biggest year of disinvestments


Govt. planned to raise Rs. 40,000 Cr during FY10-11 Achieved Rs. 23242 Cr till date (02-Feb-2011) With the upcoming disinvestments planned in Q4 FY10-11, target is likely to be achieved Upcoming disinvestments: IOC, ONGC, Hindustan Copper, SAIL While Indias IPO market cap likely to double in FY10-11 compared to previous year, Singapore recorded a 5-fold growth during the same period

Coal India Ltd.


CIL Produces non-coking coal and coking coal of various grades for diverse applications The Govt. sold 10% stake during Oct. 2010 through an IPO Its price was fixed at Rs. 245 which raised Rs. 15199 Cr. It is Indias largest IPO till date This IPO was a part of government's divestment programme and the entire amount will go to government, which will hold 90% stake post dilution.

Coal India Subscribed 15.17 times


Fundamentals The largest Coal producer and one of the largest reserve holders of Coal in the world Indias fast growing economy is dependent on Coal energy Huge difference in international price of Coal and CILs Coal cost CIL has huge expansion plans Strong track record of financial performance

Coal India Subscribed 15.17 times


Price band of 225-245 With a PE ratio between 14.8 and 16, CIL stock looked fairly valued and an attractive investment A direct cash flow valuation approach using a discount rate of 13% gave a value of Rs. 316 per share In addition retail investors were offered an additional 5% discount, which was an icing on the cake CIL decided to drop anchor investors as they expected the demand to exceed the supply making the IPO allotment process transparent

CILs Impressive Debut


Each retail investor was allotted a maximum of 173 shares due to the oversubscription The fireworks started a day before Diwali on Nov. 4th due the listing of CIL CILs stock listed at Rs. 287.75 and touched a days high of Rs. 344.75 Currently CILs stock is trading Rs. 311.60

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