Coal India news update..

In Today’s BS there was a news article on Coal India selling higher amount of coal at e-auction prices (http://business-standard.com/india/news/coal-indias-profit-earning-strategy-turns-aggressive/457427/). This has obviously helped Coal India limit revenue loss despite its inability to ramp up production in first half of current fiscal. Although, the PSU giant has been able to ramp up production in November and will hope to maintain the same in December (http://www.thehindubusinessline.com/companies/article2675260.ece), I am not sure if sixth pay commission wage revision issues have been sorted out between workers and Coal India management. If not, then this issue will limit upsides in share price. Also there is increased risk that workers can go on strike if issue is unresolved.

If Indian government has its way, Coal India will be robbed off of its cash reserves very soon. GoI has been trying hard to find ways to generate Rs 40000 crore divestment target and 4.6% fiscal deficit. Coal India with its large cash reserves becomes a soft target. I don’t think this is right and it should not be allowed to happen. Coal India should be using its cash for making acquisition and buying overseas assets at a time when it is not able to ramp up its production. But as always, government does what it wants to do.

During 3rd week of November along with Nifty, Coal India also fell to its 52 week low. I had sold some December series 260 puts. It was absolute panic time. I have started covering my puts. In case Nifty rallies some more from here, then I might think of selling some Coal India calls. But as of now it is wait and watch in case of Coal India.


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