India's coal OFS open for retail investors

The government provides for sale (OFS) to trade up to a 3% stake in Coal India (CIL)was completely joined on the first day of bidding. Retail investors may participate in the deal. The government obtained bids for 287.6 million contributes from organizations - against 184.8 million shares on offer involving a green shoe option - at an indicative price of Rs 226.12 per share against the floor price of Rs 225. Consumers may subscribe above the indicative price.

Experts said investors can subscribe so for the attractive dividend yield and reasonable valuations, as earnings growth of the country's largest coal miner could be relatively subdued in FY24.

CIL has historically had a dividend yield of 8-10%, one of the highest among large-cap companies, and is currently trading at about 3-5 times enterprise value to estimated FY24 Ebitda, which analysts believe gives headroom for expansion. The earnings growth of CIL, though, could be impacted by the recent wage revision and weaker realizations.

"When you are coming off a year which was a record high in terms of e-auction prices and has the additional burden of wage hikes, you won't be having EPS (earnings per share) growth," said Amit Dixit, vice president at ICICI Securities. "But what investors should consider is whether the EPS will see a significant drop from the current levels," he said.

"If someone wants to look at dividends, yes, but not for earnings growth or volume growth," said Tushar Chaudhari, an analyst at Prabhudas Lilladher. "In terms of ramping up volumes, there have been instances of delay in the past," he said, referring to CIL's target of annually producing one billion tonnes of coal.

Shares of CIL hit an over-one-month low on Thursday before closing at Rs 230.35 on the NSE, down over 4% from the last close. The government plans to raise about Rs 4,200 crore through the two-day OFS. It has proposed to sell up to 92.4 million shares, representing 1.50% of the total paid-up equity, as a base offer with an option to additionally sell 92.4 million shares.