Coal India jumps over 6.5%

Coal India is currently the top gainer on the BSE, going up over 6.5% to Rs.310, not too far away from its 52-week high of Rs.332. Volumes are also robust, going up around 2 times.

The sudden spike of interest on the counter is after the company announced that has hiked the price of thermal coke for all consumers, effective today, by 5%. This price hike has happened after May 2016 and the market is naturally enthused as thermal coal accounts for 90% of the revenue earned by Coal India.

It is expected that this 5% price hike will boost the company’s revenue by about Rs.1856 crore in current fiscal and will add Rs.6421 crore to annual topline.

If one may recollect, this price hike comes on the back of evacuation charges of Rs.50/tonne which is levied last month. And this levy will add Rs.800 crore to current fiscal’s revenue and Rs.2500 crore annually.

Naturally, this price hike by Coal India will have a cascading effect on inflation as the cost of power generation will also increase and so will that of making cement and fertilisers, where thermal power is used the most.

And yes, this extra money earned is going to be used to fund the salary hikes which the employees were given – it has agreed to pay its non-executive retroactively from July 2016 and this is expected to cost the company around Rs.5667 crore. Thus the price hike will fund salary hikes.

In Q2FY18, 50% of the revenue earned from operations, Rs.18,148 crore was spent on employee benefits.