To consider the draft red herring prospectus

The board of Coal India Ltd (CIL) is looking to meet on August 5 to consider the draft red herring prospectus, now being readied for submission before the Securities and Exchange Board of India. CIL, which is planning to tap the capital market with an initial public offer of 10 per cent of its equity, expects to submit the prospectus to the market regulator by the first week of this month.

CIL's Rs. 6,330-crore equity is now wholly-held by the Government which approved a 10 per cent divestment proposal, including a one-per cent share for the 3.97 lakh employees of CIL and its eight subsidiaries. Although this was done last month, advance action taken like selection of merchant bankers and legal advisers has given the company some head-start in meeting the target that it had set for itself of hitting the market by October.

It may be mentioned that this target had to be re-worked as the government nod took a while in coming. However, officials in the Divestment Ministry felt that the delay worked out well for the issue which was targeting to raise around Rs. 15,000 crore.

There is optimism that the issue has several upsides and will excite private equity funds, pension funds and also foreign institutional investors (FIIs). It is felt that the overseas vacation period till August may not have augured well for the success of the issue which is now set to enter the market in the second fortnight of October.

However, CIL is also keen to ensure retail participation and is pitching hopes on its vast employee-base. It has begun a programme of sensitising its employees for opening the demat accounts necessary for stock market operations. The company feels that even if half its employees invest in the initial public offering (IPO) there would be retail participation of almost two-lakh small investors.

Keywords: Coal India LtdCILIPO

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