Coal India to Gain ₹605 Crore from BCCL IPO with 130% Return on Investment
Coal India Limited is positioned to generate substantial profits of over ₹605.00 crore from the upcoming IPO of its subsidiary Bharat Coking Coal Limited, with the issue priced at ₹21-23 per share delivering a 130% return on the original ₹10.00 per share acquisition cost. The IPO, scheduled for January 9-13 with listing on January 16, represents the first mainboard issue of the year and forms part of Coal India's broader strategy to monetise key subsidiaries while maintaining majority control.
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Coal India Limited is set to earn a substantial profit of over ₹605.00 crore by divesting a 10% stake in its subsidiary Bharat Coking Coal Limited through the latter's upcoming initial public offering. The state-owned miner's weighted average cost of acquisition for BCCL shares stands at ₹10.00 per share, positioning it for significant returns with the IPO price band fixed at ₹21-23 per share.
Profit Analysis and Return Calculations
According to the Red Herring Prospectus, Coal India expects to earn a profit of ₹12.00-13.00 per share on the stake being sold. At the upper end of the price band, the company will receive around ₹1,071.00 crore from the IPO proceeds. After factoring in the acquisition cost of approximately ₹466.00 crore, the net gain works out to nearly ₹605.00 crore, translating into an impressive return of around 130% on the original investment.
| Financial Impact: | Details |
|---|---|
| Total IPO Proceeds: | ₹1,071.00 crore |
| Acquisition Cost: | ₹466.00 crore |
| Net Profit: | ₹605.00 crore |
| Return on Investment: | 130% |
| Profit Per Share: | ₹12.00-13.00 |
| Original Cost Per Share: | ₹10.00 |
Market Response and Stock Performance
Coal India's stock has gained 6.29% over the last five days, trading at ₹426.00 per share, supported by expectations around subsidiary listings. Market participants attribute the recent outperformance to investor interest in the planned divestments of Coal India's major subsidiaries. In the unofficial grey market, BCCL shares are reportedly commanding a premium of ₹13.50-14.00 over the likely issue price, indicating strong investor interest.
| Stock Performance: | Details |
|---|---|
| Recent 5-Day Gain: | +6.29% |
| Current Price: | ₹426.00 |
| Grey Market Premium: | ₹13.50-₹14.00 |
IPO Structure and Strategic Context
The BCCL listing represents the first in a series of planned divestments and marks the first mainboard IPO of the year. Since the issue is entirely an offer for sale, BCCL will not receive any proceeds from the IPO, with the entire amount accruing to Coal India. The company's board has already approved IPOs of other subsidiaries, including Mahanadi Coalfields Ltd and South Eastern Coalfields Ltd, as part of Coal India's broader plan to monetise its key subsidiaries.
| IPO Details: | Information |
|---|---|
| Issue Size: | ₹1,071.00 crore |
| Price Band: | ₹21-23 per share |
| Issue Type: | 100% Offer for Sale |
| Subscription Period: | January 9-13 |
| Listing Date: | January 16 |
| Coal India Stake Post-IPO: | 90% (from 100%) |
Strategic Value Unlocking Initiative
The proposed IPO is aimed at unlocking value in Coal India's subsidiary portfolio while maintaining majority control. This strategic divestment forms part of Coal India's broader plan to monetise its key subsidiaries, with the IPO scheduled to open for subscription on January 9 and close on January 13. Shares are scheduled to list on both BSE and NSE on January 16.
Bharat Coking Coal Limited stands as India's largest coking coal producer, operating primarily in the Jharia coalfields of Jharkhand and Raniganj coalfields of West Bengal. The company holds Mini Ratna status and represents a significant asset in Coal India's subsidiary portfolio, making this divestment a key milestone in the parent company's value realisation strategy.
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