Shares of Coal India extended their losing streak for the fifth straight session during early morning deals on Friday. The scrip today opened lower and went on to hit an intraday low of Rs 228.10 apiece levels on NSE.
Why Are Coal India’s Shares Falling?
The PSU stock has been falling ever since Government of India (GoI) announced to offload its 3 per cent stake in Coal India Ltd. The Coal India OFS opened for subscription on 1st June 2023 and it is going to end on 2nd June 2023 i.e. today. However, if we look at the Coal India share price history, the stock has been falling since May 30, 2023.
Coal India OFS details
Informing Indian bourses about Coal India OFS, Coal India said, “We wish to intimate the Stock Exchanges of our intention to exercise the Oversubscription Option after trading hours on T day to the extent of up to 9,24,40,924 equity shares (representing 1.50 per cent of the total issued and paid-up equity share capital of the Company) in addition to 9,24,40,924 equity shares of the Company (representing 1.50 per cent of the total issued and paid-up equity share capital of the Company) forming part of the Base Offer Size. Accordingly, the total Offer size will be 18,48,81,848 equity shares (representing 3.00 per cent of the total paid-up equity share capital of the Company as on March 31, 2023). Consequently, 1,84,88,185 equity shares would be reserved for allocation to Retail Investors, subject to receipt of valid bids, as part of the Offer on June 02, 2023.”
OFS Opens for Retail Investors Today
Coal India Ltd’s ongoing offer for sale (OFS) would open for retail investors today, with an offer size of 9,244,093 shares. The two-day issue received a solid response from non-retail investors on Day 1, receiving bids for 287,624,993 shares, up 3.46 times against an offer size of 83,196,831 shares.
Should you Invest?
Analysts are largely positive about Coal India’s prospects, though they remained a bit concerned over falling e-auction premiums. Their targets for Coal India suggests up to 58 per cent upside potential over the OFS floor price of Rs 225 a piece.
Motilal Oswal Securities sees the stock at Rs 290. This brokerage has increased its revenue estimates for Coal India by 2 per cent to factor in the incremental revenues due to the price hike.
“The e-auction premiums have drastically come off in April and May and the near-term outlook on premiums remain soft. We have increased our Ebitda/adjusted PAT estimate by 2.4-2.5 per cent to factor in the price hike benefit, which would be partially offset by the lower e-auction premiums,” it said adding that Coal India is well placed to capitalize on the growth opportunity ahead.
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “The outlook for Coal India in FY24 appears bullish, primarily driven by robust power demand in India, supported by the growth of the manufacturing sector and rural electrification initiatives. Given our positive sentiment towards the entire Public Sector Undertaking (PSU) space, we view any potential technical dips resulting from news about Offer for Sale (OFS) as attractive buying opportunities. We recommend investors to consider participating in this OFS, as we believe the downside risk is limited around the 225 level. On the upside, we see a potential target level of 275. By taking advantage of this offering and carefully assessing the risk-reward dynamics, investors can potentially benefit from the expected positive momentum in Coal India’s performance.”
Nuvama projects a dividend per share of Rs 20 each for FY24 and FY25, with a dividend yield of 8 per cent. It said the Coal India stock trades at a cheap valuation, as it revised its target price to Rs 365 from Rs 362.
Kotak, meanwhile, suggested a target of Rs 240 on the stock.
At the indicative price of Rs 226.12 a share, the bids by institutional buyers were worth Rs 6,500 crore. Coal India is looking to sell 3 per cent stake worth Rs 4,000 crore.
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