The Offer for Sale (OFS) of government company Coal India has received an excellent response from institutional investors. The government is selling its 2% stake at the floor price of Rs 412 per share, which is about 11% less than the market price. Now this opportunity will open for retail investors on Friday. In such a situation, the question is whether investors should invest money in this PSU stock or should keep distance for now. Expert opinion is mixed on this.
Coal India’s OFS remains a big topic of discussion in the market. The issue, which opened for non-retail investors on Wednesday, received tremendous demand and bids worth about Rs 19,000 crore were received. The government is selling its 2% stake in the company through this OFS. Along with this, a green-shoe option of 1% has also been kept, which has been decided to be used. The floor price of OFS has been fixed at Rs 412 per share. This is about 11% less than Tuesday’s closing price of Rs 458.15. However, many investors bid up to Rs 436.70 above the floor price, which clearly showed the confidence of investors in the company. Now this OFS will open for retail investors on Friday. Market experts believe that Coal India currently remains a PSU company with strong cash flow and high dividend. According to Trendlyne data, the dividend yield of the company is around 5.70%, which is considered attractive for investors.
Expert opinion
According to Sunny Agarwal, Head of Fundamental Research, SBI Securities, in the Mint report, Coal India is benefiting from the continuously increasing demand for electricity in India. A large part of electricity production in the country still comes from coal-based thermal power. Recently, India’s peak electricity demand reached a record level of 270.8 GW, due to which the need for coal has further increased. Experts say that due to industrialization, economic development and increasing electricity consumption in India, Coal India’s business will continue to get stable support in the medium term. The company’s strong market share and government support make it a safe PSU investment option.
Indications of risk also found
However, some risks also remain. The increasing share of renewable energy and increasing focus towards clean energy may impact the demand for coal in the future. Apart from this, government policies and fluctuations in commodity prices can also have an impact on the company’s performance. Talking about stock performance, Coal India shares have given returns of about 16% in the last one year and 22% in the last six months. At the same time, this share has increased by 220% in the last five years. In such a situation, long-term investors can look at it from the perspective of stable returns and dividends, while investors expecting fast growth should exercise caution.
Disclaimer: This article is for information only and should not be considered as investment advice in any way. TV9 Bharatvarsha advises its readers and viewers to consult their financial advisors before taking any money-related decisions.
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