Coal India slips 5% as government begins partial stake sale via OFS

Shares of Coal India (CIL) slipped 5 per cent to Rs 229.65 on the BSE in Thursday's intra-day trade as the government began offloading its 3 per cent stake, using the offer for sale (OFS) mechanism, starting today.

The floor price for the stake sale has been set at Rs 225 a share, which represents a discount of around 7 per cent from the closing price of Rs 241.2 on Wednesday. In the past two months, the stock had rallied 13 per cent till Wednesday.

The Centre has proposed to sell up to 3 per cent of its stake in the national miner CIL through the OFS route from June 1. The government is looking to garner around Rs 4,162 crore through the sale process. The stake sale would contribute to the Centre’s disinvestment target for 2023-24, pegged at Rs 51,000 crore.

Moreover, the Centre’s proposal comprises sale of up to 1.5 per cent stake in CIL on June 1 and 2, with an option to sell an additional 1.5 per cent as green shoe option. The Centre currently holds 66.13 per cent stake in CIL.

"The seller proposes to sell up to 92.4 million equity shares of face value of Rs 10 each of the company (representing 1.50 per cent of the total paid-up equity share capital of the company) (base offer size), on June 1 and 2 for retail investors and non-retail investors,'' the filing said. There will be an option to additionally sell 92.4 million (1.5 per cent) equity shares of the company.

Meanwhile, on Tuesday, CIL's board approved to raise prices of high-grade G2-G10 non-coking coal by around 8 per cent w.e.f. May 31, 2023, which would help partially offset a wage hike. Due to this revision, CIL will earn approximately incremental revenue of Rs 2,703 crore for the balance period of financial year 2023-24, the company said.

Analysts at Motilal Oswal Financial Services (MOFSL) have increased revenue estimates by 2 per cent to factor in the incremental revenues due to the price hike. The e-auction premiums have drastically come off in April and May and the near-term outlook on premiums remain soft.

"We have increased our EBITDA/APAT estimate by 2.4 per cent/2.5 per cent to factor in the price hike benefit, which would be partially offset by the lower e-auction premiums. CIL trades at EV/EBITDA of 3.9x FY24E. We reiterate our BUY rating on the stock with a revised target price of Rs 290 (5x EV/EBITDA)," the brokerage firm said in company update. MOFSL believe CIL is well placed to capitalize on the growth opportunity ahead.

Technical View

Bias: Negative

Support: Rs 230

Resistance: Rs 239; Rs 248

Coal India has been trading with a positive bias since the start of the fiscal year 2023-24. The stock has rallied 16 per cent so far during this period.

With today's dip, the stock is seen testing support at its 50-DMA (Daily Moving Average) placed at Rs 230. As long as this support holds, the stock may attempt a pullback towards its 20-DMA placed at Rs 239-odd level.

Further, the stock has given a negative divergence, in terms of change in bias for the super trend line, which shows resistance around Rs 248 going ahead.

On the downside, break and sustained trade below the 50-DMA, could lead the stock towards its next logical support levels placed at Rs 227 (200-DMA) and Rs 224 (100-DMA).

(With inputs from Rex Cano)