Coal India stock is in focus, as it is one of the top Nifty gainers today.
According to reports, ‘Coal India is considering an 11 percent price increase’ and reasons cited include higher costs and impending wage revisions. However, CNBC-TV18 has not independetly verified this news.
According to a PTI report, the company had last hiked coal prices in 2018. Its current average regulated price realisation is Rs 1,394 per tonne. There has been no price rise of fuel supply agreement coal since the last few years.
Costs have jumped on all fronts and a wage revision is due. A minimum 10-11 per cent increase is necessary to avoid bottomline erosion.
Another probable reason could be the fact that the international coal prices have surged, which makes imports even more expensive.
Besides this, business prospects have looked up as was evident in Coal India's August 2021 monthly operational numbers. The company witnessed good growth not just in comparison with August 2020 numbers but also in comparison to August 2019 numbers.
Coal demand is evidently strong as Citi has pointed out in its brokerage report that the company's inventories are down by more than 50 percent from the start of this fiscal year to 47 million tonnes.
Additionally, inventory levels at power plants have halved from March 2021 to 7 days. Coal India has enjoyed valuations support as the stock trades at 7 times the forward earnings and the street is hoping that the dividend in FY22 will be as strong as FY21 of Rs 16 or maybe a little better.
Watch the accompanying video of CNBC-TV18’s Nigel D’Souza for more details.