State-run Coal India (CIL) may scrap allotment under anchor investor plan of its mega initial public offering (IPO), as the government feels the selection of such investors - in case their demand for the issue exceeds the limit - may not be transparent.
The government expects to raise up to Rs 12,000-15,000 crore through the IPO, billed as the country's largest ever.
The Empowered Group of Ministers working on the IPO would meet by September-end to decide on the anchor investor issue. They would meet on October 12 on the price band of the shares being offered, sources told PTI.
"We believe demand for placement for anchor investors will exceed the quota limit. We may have to be discretionary about whom to choose. This is something which the government is not comfortable with, as the process of selection of such investors may not be transparent," the sources said.
The government might find it difficult to explain why it selected one anchor investor over another, they said.
CIL chairman Partha S Bhattacharyya, when contacted, said: "Even if the anchor investor portion was dropped, it was unlikely to impact the valuation and interest from investors, as all of them could participate through the route of qualified institutional buyers (QIB)."
"The response from the investors' community was overwhelming in all cities we visited, like London, Los Angeles, Sidney and Singapore," he said.
Anchor investors are those who buy shares of the company before the launch of the public issue. The concept of anchor investors was approved by the Securities and Exchange Board of India last year.
This class of investors, who cannot be a promoter of the issuer company, can be allocated as much as 30 per cent of the portion reserved for QIB. Such investors must bid for at least Rs 10-crore worth of shares
Placement of anchor investors cannot be done on a pro-rata basis, the standard norm for other class of investors, including QIB.
CIL has earlier said the offer of 63 crore shares or 10 per cent government stake would open on October 18.