7.8 lakh small investors exit Coal India

The shareholding pattern of Coal India Ltd, whose stock was a stellar performer on Wednesday and Thursday, has undergone a sea change since the IPO in October.

More than half of the retail investors who had secured the allotment have exited the stock in favour of institutional buyers.

The retail investors, who got a discount of 5 per cent in the public offer, would have made a whopping 62 per cent gains in five months if they had held on the stock till date — a stellar return from a large-cap stock when compared with the Sensex, which lost 5 per cent.

According to the disclosure submitted to the stock exchanges, of the 15.1 lakh retail investors (individuals holding nominal share capital upto Rs 1 lakh) constituting 3.96 per cent of the company's shareholding as of October 2010, nearly 7.8 lakh shareholders chosen to lock into profits much earlier.

By March 31, only 7.3 lakh retail investors — constituting 1.63 per cent of the shareholding — still held on to their shares. This may not be the same set of investors, though some investors would have entered during this period.

The large-scale profit booking by retail investors has also brought down the shareholders base of the company to less than half at 7.4 lakh.

As retail investors booked profits, institutional investors stayed put. In fact, they hiked their holdings in the company. Mutual funds and FII investments in the company increased from 0.52 per cent and 3.32 per cent respectively to 1.2 per cent and 6.09 per cent over the five-month span.

It is important to note that the Government of India holds a 90 per cent stake in the company. In the remaining 10 per cent public holding, over 60 per cent of the shares are now held by foreign players.

Institutional investors were vying for a stake in the company during the offer, going by the fact that the QIB portion was oversubscribed by 24 times during the time of the IPO.

Even as institutional investors hiked their stakes, investor holdings in this category are getting more concentrated with close to 173 institutional investors exiting between two points.

Fairly Valued

“It is difficult to ascertain what actually triggered the FII buying,” said Mr Bhavesh Chauhan, senior analyst with money manager Angel Broking. “However, there is an expectation in the market that CIL plans to sell nearly 100 million tonnes of new production annually to the steel and power sector between 2012 and 2014 at a market linked price.”

He, however, said that considering there is no significant outlook of increasing production from new mines in the next two years, coupled with the concern over availability of rakes and the constraints faced by the company in securing forest and environmental clearances for implementing projects, “CIL stock is now fairly valued”.

The CIL chairman, Mr N.C. Jha, said that CIL is channelising nearly 22 per cent of production to the open market through e-auction (12 per cent) and washed coal (4 per cent) and the import linked pricing of A and B grade coal (6 per cent) beginning February 2011. The share of washed coal —to be sold at market determined price — will move up to 6-8 per cent between 2012 and 2014, according to the company's objectives.

“Our stated objectives to increase realisations may have encouraged the institutional buyers to invest in CIL stock,” he said.

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