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

Coal India- Black Gold : Allotment

Dear All

The mega IPO of Coal India has been has an astounding success and Empowered Group of ministers(EGOM) priced the issue at the upper end of the price band at Rs 245 per share(Retail investors will get 5% discount on the above price). The government will rake in an unprecedented Rs 15,200 crore from the issue

The icing on the cake is that 90% of the unsubscribed employee quota will be apportioned between Qualified Institutional Buyer (QIB), retail and high net worth individual (HNI) in 50:35:15 ratio, in net effect it will aproximately add 2 crore shares to the retail portion.

Coal India IPO where the total IPO size was $3 billion and the retail bucket itself getting 2.5 times subscribed with close to $3 billion demand according to me is fantastic.

The company is expected to list on stock exchanges on November 4, a day before Diwali. The IPO, which closed on October 21, was subscribed 15.17 times, and mopped up Rs 2.35 lakh crore($54 Billion) against an issue size of Rs. 15,200 crores($3.2 Billion).

When it lists on the stock exchange it should open at a fairly good premium, CIL deserves to trade at a premium to global coal peers, given much lower volatility in earnings and a large headroom to raise prices in a supply-deficit environment.

COAL INDIA LIMITED SUBSCRIPTION STATS: Sr.No. Category No.of shares offered/reserved No. of shares bid for No. of times of total meant for the category 1 Qualified Institutional Buyers (QIBs) 284236398 7019464125 24.70 1(a) Foreign Institutional Investors (FIIs) 4933872050 1(b) Domestic Financial Institutions(Banks/ Financial Institutions(FIs)/ Insurance Companies) 1807527975 1(c) Mutual Funds 266896250 1(d) Others 11167850 2 Non Institutional Investors 85270919 2166004875 25.40 2(a) Corporates 1384329500 2(b) Individuals (Other than RIIs) 764448150 2(c) Others 17227225 3 Retail Individual Investors (RIIs) 198965479 458634025 2.31 3(a) Cut Off 392048500 3(b) Price Bids 66585525 4 Employee Reservation 63163644 6174300 0.10 4(a) Cut Off 5849500 4(b) Price Bids 324800 How many shares will the retail investor be alloted per full application Total shares reserved for Retail Individual Investors (RIIs) =  198965479 (A) 35% of the unsubscribed shares reserved for Employees    =  19946271  (B)                                                                                        --------------------             Total shares reserved for allotment to RII's (A+B)    218911750 (T)                                                                                         --------------------

No. of shares bid in RII segment = 458634025 Total Bids(TB)
No. of shares bids at cut off price =392048500 Cutt-off Bids(CB)

Worst Case Scenario:

In this instance we calculate allotment number by taking into consideration the Total Bids received against shares reserved for RII Segment as calculated above (A+B)

Total shares reserved including the 35% of the unsubscribed employee protion = 218911750(T)
Total Bids received =458634025(TB)

Hence = T/TB=0.477
Assuming all applications were for 400 shares then:

Allotment will be 400 shares  x 0.477= 191 shares will be alloted to retail investors.

Best Case Scenario

In this instance we calculate allotment number by taking into consideration the Cutt off bids received against total shares reserved for RII Segment:

Total shares reserved including the 35% of the unsubscribed employee protion = 218911750 (T)
Cut off Bids received (CB) =392048500 (CB)

Hence = T/CB=0.558

Assuming all applications under Cutt off's were for 400 shares then =


Allotment will be 400 shares x 0.558=223 shares will be alloted to retail investors.

In as much as the price has been fixed at the upper band the chances of getting better alotment increases.

In my opinion each RII who submitted a full application for 400 shares may be alloted atleast 191 shares and  may inch upto 223 depending on the applications submitted by those investors who applied on a fixed price basis.

CIL Grey Market Premium:

Currently quoting between Rs.39-42 per share, Please note RII are allotted shares at 5% discount so RII's will be issued at Rs.232 per share.

Current Grey market premium quoting at Rs.39-42 per share and add the retail discount of Rs.12, in net effect a retail investor's share has a total premium of atleast Rs.50 per share

Thus each allottee is sitting on a profit of  Rs. 10,000/-atleast per full application on a total investment of Rs.98,000/-

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

My recommendation is that 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

DISCLAIMER

I am NOT an investing professional. I will sometimes jump into something that appears to be good; it may or may not be. Even if it is good for me, it may not be good for you. Anything I write on this site is my opinion and should NOT be relied on or taken as investing advice. Material presented here is for informational purposes only. Before acting on anything you read on this site, you must do your own research and you must come to your own conclusion which you will ultimately be responsible for, including any loss you may incur.

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