State IPO push lifts BSNL's listing hopes

MUMBAI, INDIA: Coal India and telecoms firm BSNL are the prime candidates to list on Indian bourses under the government's new rules for selling stakes in state firms, but valuations will have to be tempered to attract investors.

The government said last week unlisted state firms making profits in the past three consecutive years should list, as Asia's third-largest economy looks to fuel growth without further widening a large fiscal deficit.

The IPO windfall could raise more than $10 billion and prompt significant inflows of foreign investment.

Coal India, the country's biggest coal miner, and Bharat Sanchar Nigam Ltd, India's fourth-largest mobile operator and No.2 telecoms firm including fixed-line subscribers, are among firms meeting the new rules.

Coal India Chairman Partha Bhattacharyya told Reuters his company has been advised by the government to appoint an independent financial adviser for a potential IPO.

"We expect to make the appointment by December," he said.

BSNL Chairman Kuldeep Goyal said the government has to decide the timing for any potential IPO of his company.

This follows recent strongly subscribed IPOs of state-run firms NHPC and Oil India, which together raised $1.8 billion for the government.

Oil India also made a strong market debut, with analysts widely agreeing its valuations were attractive.

But NHPC, and private sector firms Adani Power and Indiabulls Power (INDP.BO: Quote, Profile, Research), made muted debuts in recent months, with analysts blaming high IPO prices.

"The valuations offered by the government have to be reasonable," said Phani Sekhar, fund manager at Angel Mutual Fund.

The government would also do well to time any potential offerings when the stock market is on an uptrend, he said.

"If the government does not want to compromise on valuations, as in the case of NHPC, then it has to choose its timing very carefully."

The government last year proposed selling a 10 percent stake in BSNL, looking to raise around $10 billion, but the sale was headed off by political and labour opposition.