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CIL ups coking coal price amid low output
Date: 18/01/2017

Coal India resorted to a second price hike in the current financial year and this time it was the turn of coking coal. A steep price rise of about 141 per cent in international prices of coal has allowed Coal India to go for price hikes of its output as well. Earlier in May last year, the company had revised prices for coal being supplied under fuel supply agreements that contribute 80 per cent of its supplies. Coking coal supplies account for about 10 per cent of its output. The price hike is likely to boost the company’s estimated FY18 revenues by about Rs 3,200 crore or about Rs 3.6 a share. Incremental revenues for the remaining part of FY17 are pegged at about Rs 800 crore. The news should come as a positive given the disappointment on volumes seen in the recent past. The weak offtakes have been on the back of sluggish demand and destocking at power plants. Thus, full benefits of the price hikes undertaken by the company earlier have also not been reflected due to subdued power sector performance. The company’s September quarter performance came below Street expectations due to lower-than-expected volumes and realisations as also provisioning for the expected wage hikes. Thus the stock prices had plummeted to six months closing lows of Rs 285.05 last month. However there are some green shoots now. The company had reported about four and seven per cent rise in production and offtakes during the month of December, similar to the trend seen for November after declines in the previous three months. The offtake for the December quarter, thereby, has grown by 3.5 per cent compared to a decline of five per cent seen in the September quarter. Power generation is catching pace. Also, the company’s e-auction realisations have significantly improved to Rs 1,790 a tonne in October-November according to analysts at Ambit Capital compared to an average of Rs 1,500 a tonne in the September quarter. All this should lead the company to report a much better December quarter performance compared to the September 2016 quarter. Also, the current price hike being taken by Coal India should also take care of expected rise in employee costs (wage hikes). Source: Business Standard

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