Coal India hits new low and recovers

Coal India today hit a record new low at Rs.248  but it has recovered, going to an intra day high at Rs.257.85 and is currently just about holding onto the green.

The stock hit rock bottom on the back of its dismal performance for Q1FY14. Net sales was flat (YoY) at Rs.16472 but net profit dropped 16% at Rs.3731 crore. Volumes rose 2% at 115.36 MT but realizations dropped 2%. This the company has blamed on e-auction where the realizations dropped, which came in at Rs.2140/tonne compared to Rs.2516/tonne (YoY). Its higher tax rate of 34.4% v/s 29.3% has also contributed to the fall. EBITDA margin has dropped from 29.2% to 24%. Going ahead, the company expects margin pressures to remain through FY14.

This is one of the largest coal companies in the world and ideally, if managed well could control prices. But thanks to bad governance we are in this situation where despite the company having the power to decide the price, is down in the dumps, with falling sales realization. The market and investors are angry that a cash rich company is today being run more like a Government department and not like a corporate.