UBS Securities has maintained its buy rating on Coal India with a price target of Rs 450 citing reports in the media that the company’s independent directors are opposed to price pooling for domestic and imported coal.
“Although the pooling issue is complex, we believe resolution will be fair to CIL. We also believe the independent directors on CIL’s board will ensure there is no negative impact on CIL’s financials because of pooling,” said UBS’s analyst Pankaj Sharma in a client note.
At 11:40 AM on Tuesday, Coal India shares were down 0.2% at Rs 338. The Sensex was flat at 19,458.90.
“We think the pooling mechanism may be based on the principle that CIL may import coal and revise the notified price for FSAs (fuel supply agreements) so that all consumers share the burden uniformly, irrespective of their usage mix (proportion of imported versus domestic coal),” the UBS analyst said.
“Although the pooling issue is complex, we believe resolution will be fair to CIL. We also believe the independent directors on CIL’s board will ensure there is no negative impact on CIL’s financials because of pooling,” said UBS’s analyst Pankaj Sharma in a client note.
At 11:40 AM on Tuesday, Coal India shares were down 0.2% at Rs 338. The Sensex was flat at 19,458.90.
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The investment bank said Coal India may not be negatively impacted by the price pooling mechanism.
“We think the pooling mechanism may be based on the principle that CIL may import coal and revise the notified price for FSAs (fuel supply agreements) so that all consumers share the burden uniformly, irrespective of their usage mix (proportion of imported versus domestic coal),” the UBS analyst said.