In a successful move, the central government's offer for sale (OFS) of Rs 4,160 crore in Coal India for the 2023-24 financial year (FY24) received bids worth Rs 6,500 crore from institutional investors on Thursday, surpassing the shares on offer by 1.6 times.

According to data provided by the stock exchanges, most bids came in at around Rs 226 per share, slightly exceeding the government's floor price of Rs 225. However, shares of Coal India experienced a decline of 4.4% and ended at Rs 231 on the BSE. Over the past year, the state-owned miner's shares have traded at a weighted average price of Rs 220.

While the identities of the investors who submitted bids remain undisclosed, sources indicate that several domestic mutual funds and state-owned institutions have subscribed to the shares. The investment banks responsible for handling the share sale include Axis Bank, ICICI Securities, JM Financial, Kotak Mahindra Bank, and SBI Caps.

On Friday, shares worth Rs 415 crore, reserved for retail investors, will be auctioned. The oversubscription from institutional investors is expected to compensate for any potential demand shortfall in the retail category. Market analysts view the correction in Coal India's shares resulting from the OFS as a favourable buying opportunity.

In a recent development, the company raised the price of non-coking coal, a move anticipated to contribute Rs 2,700 crore to its FY24 revenues. As a result, revenue estimates have been adjusted by 2%, along with a 2.4% increase in EBITDA/APAT estimates to account for the price hike's benefits. However, lower e-auction premiums might partially offset these gains.

Trading at an enterprise value (EV)/EBITDA multiple of 3.9 times FY24E, Coal India continues to garner confidence. In light of the company's growth prospects, a note by Motilal Oswal reaffirms a 'buy' rating on the stock with a revised target price of Rs 290 (5x EV/EBITDA). The note emphasizes that Coal India is well-positioned to capitalize on future growth opportunities.

Overall, the successful response from institutional investors and the revised revenue estimates highlights the positive sentiment surrounding Coal India's disinvestment and its potential for long-term success.