Coal India’s Stake Sale Set to Impact Stock Price as Government Seeks to Capitalize on Overbought Market

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In a move aimed at stimulating the stock market and boosting revenue, the Indian government is planning to sell a stake in Coal India Limited (CIL), the country’s largest coal miner. Sources revealed that the government intends to offer the stake for sale through an offer for sale (OFS) on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) on June 1. The estimated value of the OFS is approximately ₹4,000 crore, with a floor price set at ₹225 per share, representing a discount of around 7% from the previous day’s closing price of ₹241.20.

This decision follows an earlier report by Bloomberg in November 2022, which highlighted the government’s plan to sell 5 to 10 percent of its stake in CIL, as well as Hindustan Zinc and Rashtriya Chemicals and Fertilisers (RCF), in order to invigorate the stock market and generate additional revenue in the fourth quarter of FY23. Currently, the central government holds a 66.13 percent stake in the public sector undertaking (PSU), while the general public owns 33.17 percent. The announcement of the stake sale had an immediate impact on Coal India’s stock price, as shares fell by 1.29% on the BSE during Wednesday’s closing session. Market experts believe that the government’s timing for the OFS is strategically advantageous, as the stock’s daily charts indicate that it is currently overbought and due for a correction. A R Ramachandran, Co-founder & Trainer-Tips2trades, advised short-term investors to consider subscribing to the OFS at the floor price of ₹225, with a target price of ₹256. Coal India’s stock has witnessed fluctuations over the past year, reaching a 52-week high of ₹263.30 on November 9, 2022, and a 52-week low of ₹174.60 on June 20, 2022.

The current stake sale announcement:

The current stake sale announcement by the government is likely to impact the stock price further, as investors respond to the news and adjust their positions accordingly. While the government aims to capitalize on the overbought market, it remains to be seen how investors will react to the discount offered on the OFS floor price. The success of the stake sale will depend on various factors, including market sentiment, investor appetite, and the broader economic landscape. As the government moves forward with its plan to divest a portion of its stake in Coal India, market participants will closely monitor the developments and assess the implications for the company’s stock price.

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