Posts Tagged ‘Coal

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.

30
Aug
11

Coal India follow up..

In one of my previous post https://writingoptions.wordpress.com/2011/08/20/coal-india-indias-most-valuable-company/ , I had written about selling Coal India 440 call. On Friday, I sold PSU 420 calls. In the last few days, there have been some negative news around Coal India. Twenty two mines of Coal India’s subsidiary Bharat Coking Coal Limited (BCCL) mines were banned by Jharkhand Pollution Board. Apart from mining ban, Coal India is also negotiating on the wage issues. Workers are demanding wage hike in excess of 100% whereas management and analysts had built-in 30% hike expectation. On Friday, the Supreme Court banned mining in two districts of Karnataka. This also had a negative sentimental impact on Coal India. Given all this news environment and weak market, I don’t think Coal India can cross 400 in this series.

20
Aug
11

Coal India: India’s most valuable company

Coal India became India’s most valuable company by overtaking Reliance Industries. Four years ago RIL became M-cap leader by toppling ONGC. Coal India had announced its Q1 results on August 12. Results were above estimates with consolidated PAT increasing by 64.1 percent to Rs 4144 crore. After Q1 result, Coal India rallied sharply to 400 odd levels.

I saw this as an opportunity to write Coal India calls. In this volatile market environment, PSU giant stock has been rock steady and acted as a defensive. But to think that Coal India will move another 12% from current levels would be too much. New draft mining bill, according to which coal producers would have to share 26% of profits with local people, will continue to be an overhang on Coal India stock. Although some of this would be passed onto buyers as price increase. With this thought I wrote September series 440 call. This call will yield 11.36% in 41 days. I am not saying that Coal India will fall from these levels nor will it increase substantially. I can write puts as well but in this volatile market I shall refrain myself from writing naked puts (When I wrote Nifty puts, I bought protection through higher level puts).




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