Coal India: Short-lived reign at the top, margin fears loom

Shaheen Mansuri

Moneycontrol.com

Till a few days back, Coal India was the toast of the town, having knocked Reliance Industries off its perch as the company with the highest market capitalization. But the state-owned miner has not been able savour its new-found glory for long. Demands from its labour unions for higher wages, and the directive from the Jharkhand Pollution Board to close down 22  mines operated by subsidiary Bharat Coking Coal, have pulled down the stock to the number three slot in the market cap rankings this week.

Analysts are divided on how the stock will perform in the coming days.

Anirudh Gangadhar and Nishit Jalan from Nomura seem confident that the company will tide through this short lived situation. Both these analysts have approached the performance of the stock in three different situations.
* First, expect the disruption in production to be short-lived as CIL has already taken a legal recourse.
* Second, even if the mines are shut for two months, the offtake would potentially remain unaffected with CIL having around 7.5 metric tones of inventory.
* Third, CIL already has the cluster clearance and has already applied for mine-wise permission which is expected soon.

Nomura has a