Coal India | Some negative factors not discussed yet

JackPotter

Active Member
#1
Those who bought the Coal India IPO and booked a profit, made a fortune within days of listing. The hype and hoopla created around it succeeded in wooing the FIIs too. The listing effect has no doubt helped to maintain the stock's price above 300 levels for nearly two months now. However, we can't deny that it's gradually declining from Day 1 (CMP: Rs. 303.75).

So, what are the negative news which may affect Coal India's stock price? What are the obstacles this company has to go through before it may jump again? For those who missed out on buying the IPO, when is the right time to invest in the Coal India for long term?

The following points are not discussed by analysts till now, however, in few months their tone is going to change:

  • Now analysts are saying Coal India has huge reserves. I guess in few months, they are going to say Coal India experienced significant delays in obtaining relevant statutory and regulatory approvals for the acquisition of land and surface rights to commence mining activities because their reserves are in Assam and West Bengal." Land acquisition in these 2 states is not so easy. Remember example of Tata Motors in West Bengal and statement of Rahul Ghandi in Orissa. Apart from that, most of the Coal India reserves are situated in forest land and significant Procedural delays in obtaining the requisite approvals from the Ministry of Environment and Forests can't be ruled out. Also, there can be no assurance that Coal India will be able to acquire land and associated surface rights for all of its projects in the forest land.
  • The Ministry of environment and forests is currently in discussion with the Ministry of commerce regarding a proposal for the demarcation of certain coal bearing forest areas in India based on the permissibility of using such land for mining purposes. If such proposal is implemented and forest areas are demarcated, it will restrict the mining activities. Then, what do you think will happen to the price of Coal India share in the market? :)
  • The Jharia and Raniganj coalfields are susceptible to fire and land subsidence and pose a serious environmental, health and safety risk. I hope that the news of fire doesn't burn the share price in the coming summer. :)
  • Whenever any increase in the transportation cost is announced in the rail budget, (trains are largest transportation vehicle for coal) the price of our Coal India share shall take a bow. :)
  • Two of Coal India Subsidiaries, BCCL and ECL have been referred to the Board for Industrial and Financial Reconstruction (BIFR). (Means declared sick/diwalia ho gai hai). Interestingly, during the IPO issue days, the news of one of these two regaining the healthy status in couple of years from now was spread. Also, it was said that the other one will be healthy in few more years. Hype, hype and more hype. LOL
  • Some of the Coal India assets and mining operations are located in areas of India that are exposed to risks of attack by Rebel groups (Maoists/Naxalites), such as in Jharkhand, Chhattisgarh, Westbengal, Orissa and Assam. Read this article for more insight.
  • The use of alternative energy sources for power generation could reduce coal consumption by Indian electric power generators in the years to come, which may result in lower demand for coal.

Hence, I would suggest our investors to buy Coal India when these negative factors start affecting its stock price. Also, please keep this thread alive by sharing any thing negative you hear about Coal India. I guess that the listing gain effect will be adjusted within 1 year when the FIIs will have booked the profit (due to above factors). :)
 

columbus

Well-Known Member
#2
Those who bought the Coal India IPO and booked a profit, made a fortune within days of listing. The hype and hoopla created around it succeeded in wooing the FIIs too. The listing effect has no doubt helped to maintain the stock's price above 300 levels for nearly two months now. However, we can't deny that it's gradually declining from Day 1 (CMP: Rs. 303.75).

After seeing such a great listing Price and one of the favourite counters
preferred by many , ONCE I took intraday position in COALINDIA.I had a
bad experience with it and as of now ,I do not think it is a great counter.
 

EagleOne

Well-Known Member
#3
Too late a warning for me. I got rid of my stock on the listing day at almost double the price!:D
 

swati23

Well-Known Member
#4
"gradually declining from Day 1 (CMP: Rs. 303.75). "
What were you expecting? Price to move up continuously from 350 levels. Thats what retail investors think(Including me).....once a stock stops moving ahead they think its won't move up further and book out. I'm pretty sure many of the retail investors must have booked their profits in Coal India. It has trading at 40% above its issue prices, it is bound to have a correction.

Since you talked so much about the negative factors, I thought should put out the positives.

1. Coal India is a government company unlike Tata Motors. It is in the interest of the government to make sure Coal India gets all the clearances it needs. From what I read in newspapers recently, Coal India can maintain its current production levels till 2017 atleast even if it doesn't get the necessary clearances.
2. It is the world's largest producer of Coal and also the cheapest. Also, they have like 85000 crores available which means they can easily adapt as per the requirement.
http://indiaeducationdiary.in/Shownews.asp?newsid=5125
3. The FIIS/DIIS must have considered all these factors before applying for the IPO. Do you think they have blinded pumped in Rs 1.20 lakh crore just by listening to what is being told?
4. Coal is still cheaper than most of the alternate energy sources. As you India is slow in implementing everything....what makes you think alternate energy resources are going to reduce coal consumption in the near future. Recently, when the French president came, we signed an agreement related to a nuclear power plant. Its first unit will be completed only in 2018.
5. Most of your arguments are based on ifs and buts. Its not the case only with Coal India, almost all companies have these kinds of issues.

Eg: IT Companies. We went for an IV at Patni Computers and there they gave us a presentation on what kind of pressures are faced by IT companies.
1. Rupee is increasing against the dollar.
2. Smaller countries like Philippines and Indonesia are offering services at a cheaper price.
3. India's economy is increasing rapidly. Gone are the days when engineers would happily work for 1000 a month.

All these things are bound to affect major IT companies like Infosys, TCS, etc. Does that mean they are going to fall like nine pins over the next one year?

Anyways, still as you say if it does reach Rs 100 in a year, I will myself pay you Rs 100 for every share I buy at Rs 100.
 
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JackPotter

Active Member
#5
Thank you, Swati for once again putting a brave front for Coal India. :)

LOL. By mentioning Rs. 100 in the canteen's thread, I meant that it will reach new lows in one year. Thus, it will give better buying opportunities than now. The hotter they become, the harder they fall. :)

Swati, Government can't control the stock price of its baby more than the Market. If that would be true, why NHPC is trading below its listing price of Rs. 36 now?

Just cuz FIIs have subscribed to IPO, doesn't mean that it has become an excellent stock. I totally agree with you that FIIs must have considered all these factors. However, the question is "Can we beat the pros at their own game?" :)

That's why I suggest that not to follow the FIIs steps blindly. We should do our own research while investing. This doesn't mean that FIIs are going to continue their buying spree in this stock.

I agree that it may take years for the alternative sources of energy to replace coal. However, the process has started. :)

Since you've brought the topic of IT companies, I would like to give an example too. :) In the year of 2000, CISCO was termed "Tomorrow's Internet superhighway." Why not? The stock price had risen 50 times over the last six years. It had huge cash reserves of more than $7.5 billions (like our Coal India's coal reserves :)). Still the stock price fell by 76% in the next two years (2001-2002).

My only point is that the present stock price of Coal India is high for investment. If it doesn't fall, there are dozens of more good scrips in the market to invest.

P.S.: If it falls (to 100), I'll buy as many as you will with your blessings. :)
 

swati23

Well-Known Member
#6
First of all, you should go and read your post again. You clearly mentioned according to your analysis it would be below Rs 100.

I never said government can control the price. I said it is in the interest of the government to give clearances to Coal India. We are still very much reliant of Coal for most of our energy needs.

I'm myself working on a project on Cloud Computing which is supposed to take over from the traditional methods of outsourcing. The process has started but that doesn't mean the traditional method will go away today itself. According to research, it will take atleast 5-7 years more for it to be a major technology in terms of outsourcing. Similarly, the process has started but as I said earlier it will take atleast 7-8 years to be implemented.

Honestly, I don't know much about the Cisco stock but the answer to your question is in your post itself. Also, I thought I should look at the figures myself.

Cisco Stock price in 1994: $2
Price in 2000: $ 50.00 (Figures from Google Finance)

Thats an increase of 2400% over 6 years. Next 2 years, it falls by 76%. Looking at the figures you can understand it went far ahead than its real value. No company can grow at that level. Also, the Dot-com bubble happened at the same time. If such a thing happens, no scrip is spared be it Coal India or any other. The same thing happened in 2008....everything was beaten down heavily.

Mr SavantGarde thinks it will reach Rs 1000 in 2.5 years and anything around Rs 300 is a good level to get into. Personally, I don't have much knowledge about the fundamentals and stuff so I'd rather go by his 6 years of experience.

Also, I would like to thank you for your comment on Cisco. Got to learn about the Dot-com bubble because of it :)
 
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JackPotter

Active Member
#7
Okay, I said 100. Just wait for a coal scam involving $2 billions to hit the news again. Like you said, implementation of new process takes time in India. I would say, removal of corruption will take time. And the new scam figures are always greater than the previous one ($2 billions). :)

I would love to hear from Mr SavantGarde about his views on Coal India. Here I'm thinking that it will be a miracle if it reaches Rs. 400 next year. :) If there is a post from him, please give the link if you know. Else I request him to explain about his bullish research in this thread. Hope its something new than what you've already mentioned.

Still 2.5 years is a long time. Market may crash and rise again during this period. I'm not sure what's gonna happen after January. :)
 

PGDIMES

Well-Known Member
#8
Dear Mad (not literally:), I think this is the initials of your first name),

Plz find my views in blue:


Okay, I said 100. Just wait for a coal scam involving $2 billions to hit the news again.

To establish a wrong statement, you are completely going out of topic and making some absurd assumptions...

I would love to hear from Mr SavantGarde about his views on Coal India. Here I'm thinking that it will be a miracle if it reaches Rs. 400 next year. :)

I hope you will watch the miracle with eyes wide open next year...;)

If there is a post from him, please give the link if you know. Else I request him to explain about his bullish research in this thread. Hope its something new than what you've already mentioned.

Go through the mother thread and you will find SG's relevant views on Coal India at the time of its listing (Oct 18 to Nov 3)

P.S.- I'm not overwhelmingly bullish on this company at this stage but not as bearish to mention 100 levels under normal market conditions...:) The quality of coal produced in India has less calorific value (mainly lignite where as the quarries of Europe supply anthracite/bituminous variety)...
 

JackPotter

Active Member
#9
Yes, it is Mad indeed. Glad that you remember. You guys may call me maddy. :)

Under normal market conditions, I don't expect it to fall below 100 either. That's why I gave that scam example (this assumption is quite real). More because lady was insisting why I took a call of 100 in the canteen thread, despite of my clarification of 100 levels in the previous post.
By mentioning Rs. 100 in the canteen's thread, I meant that it will reach new lows in one year. Thus, it will give better buying opportunities than now.
However, under normal market conditions, I expect that it can go below its IPO price of Rs. 245. :)

Alright, I'll try to search the posts by Mr. SavantGarde
 

TraderRavi

low risk profile
#10
कोयले की कोठरी में ....कैसो ही सयानो जाये ....एक दाग लागी है पे लागी है ........:rolleyes:


..:argue:

.....
 

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