LIC saves Coal India OFS....

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Life Insurance Corporation and other domestic institutions bailed out the government's biggest disinvestment offering by picking up a substantial chunk of Coal India's shares in the offer for sale (OFS) that concluded on Friday. The insurer is believed to have invested more than Rs 10,000 crore, helping the new government's first major disinvestment offering sail past the finish line. Coal India's offer for sale was oversubscribed 1.06 times with major support from domestic insurers and mutual funds. The government received bids worth Rs 24,174 crore against an offer size of Rs 22,613 crore.

Disinvestment secretary Aradhana Johri said the sale was a success, with good participation from all investors.

"It is not only the largest single issue but is also equal to the highest collections for the whole year of the highest of any year in the past," said Johri.

The success of the issue should help the government meet its disinvestment target and reduce market borrowings which otherwise would have been needed to plug a sharp shortfall in revenue.

The indicative price or weighted average price, according to the BSE website was Rs 358.49. Shares of Coal India declined 3.8% to end the day at Rs 360.85. The floor price of Rs 358 was a 5% discount to Thursday's closing price. The sale reduces the government's stake in Coal India to 79.65% from 89.65%.

Other domestic institutions led by GIC, chipped in by buying shares more than Rs 1,000 crore. About Rs 11,360.13 crore worth of shares were purchased by insurers; retail investors bought Rs 1,852.55 crore; mutual funds purchased Rs 603.11 crore; foreign institutional investors and banks purchased Rs 8,485.65 crore of which FIIs alone, led by Capital International, bought Rs 6,000 crore worth of shares.

Domestic institutions have been sellers for the last 10 days, selling shares worth Rs 8800 crore mainly to invest in Coal India. The government raised Rs 22,500 crore from Friday's issue, the biggest such receipt since the Vajpayee-led NDA started the disinvestment process in 1999-2003. LIC bought more than 40% of the shares that were on offer, bankers and fund managers said.

Asset sales to plug revenue shortfall and meet development expenditure and spending on infrastructure have fallen short of target in the past few years due to lacklustre market, poor performance of companies. The government could raise only Rs 15,820 crore in 2013-14 versus a target of Rs 40,000 crore. In 2012-13, disinvestment yielded Rs 23,957 crore against a target of Rs 30,000 crore. This government has now raised about Rs 24,300 so far against the target of Rs 58,425 crore. In December, the government raised Rs 1,715 crore by selling shares of Sail, the government owned steel company.

This is the biggest ever share sale by any company in India and exceeds the previous record of over Rs 15,200 crore made by Coal India itself in October 2010. "It's a huge success for India's disinvestment programme and sets the ball rolling in 2015 for more issuances across public and private sector," said Sanjeev Jha, head of capital markets, Bank of America Merrill Lynch. "It's a testimony to the strong investor sentiment that exists for Indian markets and we could see upwards of $30 bn of issuances through the year".

A majority of domestic brokers recommended subscription to the offer citing inexpensive valuations and strong growth perspective following the change of government policies.