Very interesting podcast on the future of Coal(with references to Coal India):
Got to learn a lot of things. The irony of India now allowing coal exports despite being import dependent, transport/pricing challenges, lack of an independent regulator and no attention given to conflict of interest of private contract mine operators of Coal India now becoming Coal miners themselves and possibility of a Coal exchange like we have for electricity(and now gas).
can you please provide the link to this.
Thanks
Hi @aveekbhat
The YT link shows up in my post above but I’m posting the orginal Spotify link which i listened to:
I posted the YT link assuming it would be easier for most people to access
BTW, here is the link to the TRANSCRIPT
Coal Still Powers Much Of India’s Industry. Why Does It Remain A Troubled Sector? to go-along with the podcast episode
Not able to understand the market reaction to the CIL’s quarterly results..
Coal Offtake was down 2% for Q4 aswell as for the full FY as compared to last.
Now April month the offtake is down again by 2% compared to last year.. so the trend continues..
Infact Production has seen a sharper fall of 9.7%
Wonder if the market was trying to find a reversal here but going by April figures its a few more months away..
Though performance of Coal India is not so good, FII and Parag Parikh MF have been raising the stake continuously for past 3 quarters. This may have partial influence on the upward trend in the stock price.
Also, generally before Record date for the dividend, price goes up.
There could be more reasons which we do not know but Market is probably aware of.
GOI launches OFS to sell 1%, with an option to sell additional 1% incase of oversubsciption. FIIs have surely been increasing their stake, so expecting 2% promotor stake will go down to 61.13%
Also in related development, Indonesia (World’s largest exported of Coal by Volume), is moving to nationalize its coal and other natural resource exports to have greater control of natural resources.
Three key events seem to have happened the past week:
A blast at the Liushenyu Coal Mine
Coal India OFS at just 412
Historic high shares traded at the 450 price band last week.
Initial thoughts:
The blast at China killed more than 80 people and seems to be the most severe since 2009. The Chinese government has said it would take strict measures. Production of coal may get affected. Coal prices have also gone up a bit. Higher coal prices mean better realisations for Coal India. I believe the Q4 result shows this
An OFS offer at 412 seems too low considering the stock has a reasonable minimum return of 25 rupees on the share in dividend. This mounts to a ~6% dividend yield for an investor. Book value and price to book value are large and reasonable respectively. An Offer For Sale at 500 would have still resulted in a decent minimum yield of ~5%. Got to wonder if the governement missed out on some value in the stock. Which brings me to my next point
Wednesday saw the day opening to the previous evenings news of the OFS price. 412. The market opened down at 430. However, it continued a steady rise to 460 while also clocking in massive volumes on the way. Just Wednesday and Friday together had 200M shares traded. Delivery volumes were also satisfactorily high.
Final thoughts(would love opinions from yall):
Coal Indias investments and performance are at the end of the day tied to the judicious use of coal, Indias best available Energy resource. The country would do what it must to ensure it has Electric Energy. Coal India is still at the heart of that objective. Recent changes likes the US Iran tensions that caused the oil price rises, and the Indonesian governments move to nationalise resource usage have not changed what Coal represents to India. India tries its best to maintain and ensure the availability and usage of key energy resources like petrol, cng, electricity, etc. A company like coal India that deals in providing coal would be important in such a context as thermal energy depends on coal. Coal India gains if its able to sell more coal or same coal at higher prices. Elevated coal prices hence result in better realisations for the company’s bottomline. Even with any issues associated with being a PSU stock, it cant be denied that at current price it offers a 5% minumum dividend yield with future yield possibly increasing if the company decides to give back more cash due to more EPS.
A lot of smart money I think know this. For example, Parag Parakh Flexi Cap fund has been holding shares of this company since a while. Last week saw heavy activity in the stock as can be seen with the trading volumes seen last weekend. There does seem to be a decent offering with reasonable downsides from coal India. All of this also brings a question to my mind: Did smart money invest or exit this stock last week.
Note: Invested and biased. Not a recommendation for investment. DYOR
While the ofs was at 412, didn’t the govt, get 447 due to oversubscription or was that just for friday?
