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Wednesday, October 13, 2010

Coal India IPO price band fixed - Should you buy it?

Coal India IPO is the largest IPO in world stock market history. It is opening for sbscription on October 18. The government today fixed the price band for its initial public offering at Rs 225-245.

Subscription to the Rs 15,000 crore IPO closes on October 21.

Coal India is the world’s largest coal company. It is one of India’s largest public sector enterprises and Coal India IPO will go on to create a company with a market cap of in excess of Rs 1.5 lakh crore.

Coal India has coal reserves which are the largest among all its peers in the world by many times. Its coal production has steadily grown and today it is the largest coal mining company in the world. The aggregate production last year was 431 million tonne which is slightly higher than the aggregate production of the second and third largest coal mining companies in the world.

Coal India is a financially profitable, debt free, large, financially sound company. It has always pursued a strategy aiming at physical volume growth and company is fairly well to take on any kind of competition with any company globally.

All global peers of Coal India have their valuations valued at 11 to 13 PE ratio. If the EPS stands at 16, the PE ratio comes to be little over 15 at Rs. 245. This is slightly above the comfort zone if compared to global peers. The 5% discount factor for retail investors would work though.

I was listening to Mr. Bhattacharya on TV show, most of the new realization in terms of growth for company are still 3 to 4 years away. No doubt company have tremendous assets and growth potential, investors should buy IPO of Coal India only for long term. There are good chances of stock market corrections in next 2 - 3 months and you might get Coal India at near issue price or maybe little below!

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