Sell Coal India at Rs 350-360: Rajesh Agarwal

Sell Coal India at Rs 350-360, says Rajesh Agarwal, Head of Research, Eastern Financiers.

Agarwal told CNBC-TV18, "Coal India's future depends on what government of India decides because this being a government company. As we all know that FSA was announced sometime back, even in the Budget it was again said that the Coal India should be signing FSAs with power companies. Although this news is very positive for power companies but if you look at Coal India as such, the balance sheet being strong there is a strong gap in demand and supply."
He further added, "After signing this FSA I think the margins would be under pressure because one, either the company has to increase its capacity which seems to be difficult considering the fact the kind of labor problems we see in government companies. Two, the company might go for imports but again that seems to be a problem because international prices of coal are 3 times than what domestic prices are. Even if the company is able to increase capacity there is acute shortage of rakes, without rakes it will be difficult to serve this output. So I think in the short term there would be margin pressures in the company and one would be better selling at around Rs 350-360 levels. In the long term though things might change if some new regulations come in but in the near future I think Rs 350-360 is the optimum level of this stock."