13
Jan
12

Coal India : Surprisingly positive news

It looks like some better sense has prevailed at centre. To bridge the deficit and meet Rs 40000 crore disinvestment target, Coal India might announce a  significantly large dividend (http://www.moneycontrol.com/news/cnbctv18-comments/finmin-may-declare-rs-1012-dividend-for-coal-india-source_649974.html). I had argued earlier that dividend is much better option than buying government stake in unrelated PSU’s. Dividend will be equally beneficial for minority shareholders.

The coal giant has also settled wage negotiations with workers under sixth pay commission. Effective hike would be 25%. This is a big positive for stock, since it removes uncertainty and fear of any kind of strike. Now stock performance would be a function of production ramp-up. I feel it has put kind of floor to Coal India stock price and should not go below 300 in short term. During Coal India’s earlier fall to closer to 300-305 levels, I had sold OTM puts. I have started squaring those puts now.

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