Srikanth Kumar Konduri

The Dog & Pony Show

(konduri@aol.in)

Team: Rambling Souls

IMT Ghaziabad

Saurabh Ashok Thadani

(

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-FebPSU
Issue
Current
Amount
2011)
Price

Price

Raised

SJVN (IPO)

Rs. 26

Rs. 21.15

Rs. 1062 Cr

EIL (FPO)

Rs. 290

Rs. 282.55

Rs. 960 Cr

CIL (IPO)

Rs. 245

Rs. 311.6

Rs. 15199 Cr

PGCIL (FPO)

Rs. 90

Rs. 95.5

Rs. 3721 Cr

MOIL (IPO)

Rs. 375

Rs. 411.1

Rs. 1237 Cr

SCI (FPO)

Rs. 140

Rs. 114.2

Rs. 582 Cr

PSB (IPO)

Rs. 120

Rs. 108.05

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

Thank You