The government on Tuesday set the price band for the eagerly awaited initial public offer (IPO) of India's largest coal producing company, Coal India (CIL), at Rs 225-245 a share. The ministerial panel has also decided to give a 5% discount to retail investors and the company’s employees, Coal Minister, Sriprakash Jaiswal said.
Analysts meanwhile are divided on whether the price band is expensive or not. While Deven Choksey of KR Choksey Securities feels that the band is better than expected, SP Tulsian of sptulsian.com and Prithvi Haldea managing director of Prime Database differ in opinion.
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“We were expecting it on the higher side—between Rs 250-260 a share. This particular price band is much better as far as the investors are concerned. It gives you an opportunity to score on the listing thereafter, which I think is going to be positive, because retail investors are getting it at Rs 225 a share,” Choksey said.
But for Tulsian is it quite expensive. He would have preferred a lower band. “I have been taking a call of Rs 220-230 a share because if you go by the international peers of similar size they have all been ruling at a 11 to 13 PE multiple in the global market while if you work this out in the upper band at Rs 245 this translates into a PE multiple of 15 or may be over 15, if I take an expected EPS of 16. So going by those standards definitely the issue price or the issue band is quite expensive.”
Similarly, Haldea said he would have preferred a 10% discount for retail investors rather than the 5% given now. “10% would have gotten larger number of retail investors even in case the institutional response was not that strong. But at 5% the cue that the retail investors obviously look for is a very strong demand from the institutions,” he reasoned.
“Either the 10% discount should have been given by making an exception to this issue to the retail investors or if the 5% retail discount that has been fixed the price band should have been lower at Rs 220 to Rs 230,” Tulsian added.
Source: https://www.moneycontrol.com/news/ipo-issues-open/cil-ipo-price-band-fixed-howexperts-reading-it_490813.html
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