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Sunday, 31 October 2010

Coal India Allotment Plan Out

Dear Fellow Investors

Linkintime(http://www.linkintime.co.in/site/ipo.asp) the Registrars to the IPO of Coal India completed the allotment of the shares today, I have been alloted 199 shares for every full application(Rs.98,000/-) I submitted, interestingly the allocation has been higher than most Pundits in the market had predicted.

Retail investors will get shares at Rs 232.75 apiece after a discount of 5 per cent on the issue price of Rs 245.

Surprisingly many stock market "Pundits" had predicted a maximum allotment of 173-183 shares for retail investors despite having knowledge of two things — subscription of 2.31 times in the category and under-subscription in the employee quota, as is evident from the actual allotment that the Pundits got their calculations wrong YET AGAIN.

I am pleased to inform that I published a detailed analysis wherein I discussed various scenarios with a view to calculating the number of shares that will be allotted and in the process suggested an allocation of atleast 191 shares for every full application submitted, the link to my artcile is posted for your convenience.

http://eazeetrade.blogspot.com/2010/10/coal-india-black-gold-allotment.html
 
As I mentioned on my blog on the 26 October, Empowered Group of Ministers(EGOM) decided to distribute the unsubscribed portion of the shares in the employee quota proportionately among the qualified institutional bidders, high net worth individuals (HNIs) and retail investors. 

According to that formula, retail shareholders got 35 per cent of the unsubscribed shares added to their pot.

Of the 6.32-crore shares on offer for the employees, only 0.1 per cent were subscribed because of the persistent campaign by some Coal India unions who did not let employees apply for shares.


CIL Grey Market Premium:

Interestingly the grey market premium is still quoting between Rs.39-42 per share clearly indicating the euphoria, Please note retail investors have been allotted shares at 5% discount so RII's will be issued at Rs.232.50 per share, in net effect a retail investor's share has a total premium of atleast Rs.50 per share

Now that we know that retail investors have been alloted 199 shares, in net effect each  retail allottee is sitting on a profit of  Rs.9,950 /-on a total investment of Rs.98,000/-that works out to 10% return on investment. Kudos to Coal India for leaving money on the table for the small investors.

For those of you who pre-sold your allotment for Rs.4,800 to Rs.5,000/- unfortunately thats a notional loss of Rs.5,000/- per application.

Listing Strategy: 04th November 2010

In my opinion, Coal India deserves to trade at a premium to global coal peers with a price target of anywhere between Rs.300 to Rs.325 on listing. The coal-major has substantial headroom to increase prices in coming years and will provide a linear earnings trajectory and impressive returns on the capital employed.

This is the first IPO in India which will have the listed company direct entry into Nifty 50 and Sensex 30 indices.
This is the first IPO for which there will be a direct entry into the derivatives (futures & options) segment


If in the process of booking profits if CIL lists at 275 and below, then please go out there and buy (obviously subject to your own due diligence), this is a share which you can bequeath to your grand children.


Happy Investing

Prashant

2 comments:

  1. very interesting and impressive, Prasahant.!!I read abt. coal india and kohinoor foods. u covered quite an information. keep it up..

    ReplyDelete
  2. Hi Prashant
    Its really excellent analysis on Bajaj Holdings,Coal India.

    But your latest post on blog is dated 30 Oct. 10.
    Thats quite old one.
    Please keep on updating with your value-picks more frequently.Overall well researched and presented.
    Thanks.
    With Regards,
    Vikas Bargale

    ReplyDelete