SBI, IDFC, L&T arm and CIL will tap the market this week
The initial public offering (IPO) of Coal India will vie for funds with bond issues from SBI, IDFC and L&T Infrastructure Finance.
Through retail bonds, SBI aims to raise Rs 1,000 crore, while IDFC is targeting Rs 3,400 crore and L&T Infrastructure Rs 700 crore.
The retail component of Coal India IPO will be about Rs 4,886 crore.
SBI promises an interest rate of 9.25-9.5 per cent on a 10-year bond and an additional interest of 0.5 per cent if investors continue for another five years.
"We believe there will be large retail investor appetite for the bond issue as we are offering a very attractive interest rate of 9.5 per cent for 10 years. In fact, we hope to increase the frequency of such retail bond issues every quarter so that the bank is able to have long-term funds," OP Bhatt, chairman and managing director of State Bank of India (SBI), told reporters at a
press conference while launching the retail bond issue.
The SBI bond will yield 200 basis points more than the 10-year fixed deposit of the bank.
Prithvi Haldea, chairman and managing director of Prime Database, said retail investors had put money in savings accounts and fixed deposits, and were waiting for an opportunity for better returns.
"Reliance Power, which has no projects on stream and no revenues to show, managed to attract 46 lakh retail investors who put in Rs 39,900 crore into the IPO. The retail portion was oversubscribed 14 times. If an issue is well planned with the right pricing, it will have ample takers," he said.
While the infrastructure bonds issued by IDFC and L&T are tax free, SBI bonds are taxable. IDFC bonds offer an interest rate of 7.5-8 per cent a year for 10 years, while L&T bonds offer 7.5-7.75 per cent.
The IDFC bond issue, which opened for subscription on September
30, is generating investor interest from nearly 32 cities.
"We extended the bond subscription period by another five days as the Sebi clearance for the issue in non-demat form came only this week. After this, we are seeing a lot of interest in smaller cities like Indore, Baroda, Surat and Coimbatore," said a senior IDFC official.
manjuab@mydigitalfc.com COAL India's Rs 15,000 crore mega issue, which opens for public subscription on Monday, has garnered a bullish endorsement from most market experts who believe it would be the star attraction of the week for all, including retail investors.
"This week the main attraction for retail investors will be the primary market with the mega IPO of Coal India slated to open on Monday," said Saurabh Jain, research head (retail) at Delhi-based SMC Global Securities.
CIL's IPO, priced in the range of Rs 225 to Rs 245 a share, is the biggest issue in India's history so far. The offering closes on October 21. For qualified institutional buyers, which include FIIs, insurance firms and mutual funds, the IPO will close on October 20.
Analysts said the issue will be important not only for the primary markets but also to secondary market participants, who will be watching it closely. In fact, such was the momentum to stock up cash for the CIL issue that in just two sessions BSE benchmark Sensex sank a whopping 500 points.
Besides, there will be some short-term pressure in the money market, as experts believe there could be a total liquidity impact of roughly about Rs 150,000 crore during this IPO.
"The liquidity tightness during a large IPO occurs as a result of the fact that many bids are financed through borrowing. This leverage shows up as a temporary expansion in the credit during the IPO period," Axis Mutual Fund said.
Brokerage house CLSA said, "CIL deserves to trade at a premium to global coal peers given much lower volatility of earnings and large headroom to raise prices in a supply deficit environment."
CIL is one of the largest companies in the world based on the coal reserves of 64,786 million tonnes.
