Coal India Ltd’s (CIL) chairman and managing director N.C. Jha said on Wednesday that the company’s production target for the current fiscal has been revised to about 440 million tonnes (mt) from 452 mt earlier. The CIL stock fell by 3.5% to 313 on a day the benchmark Sensex declined by 2.3%.

The fact that the miner will not be able to meet its production target in the year to March should not come as a surprise, as investors were anticipating that to happen.

A file photo of Coal India workers

While many analysts had already lowered production assumptions, some had revised their numbers again after the September quarter results were announced. In a note to clients last month, analysts from IIFL Research said that following a 5% year-on-year (y-o-y) fall in the first half of the current fiscal, they now forecast a 1% growth in the second half, translating into a 1.6% y-o-y fall in production.

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CIL’s shares have fallen almost 25% from their highs in June on concerns of wage provisioning, the draft mining Bill and rake availability. At the current market price, the stock trades at about 12 times its estimated earnings for next fiscal. But despite the decline, near-term upside appears limited. One reason is the uncertainty on wage provisioning. The company has made provisions for a wage hike in the September quarter based on previous increases. Investors are likely to keep a tab on the outcome of wage negotiations in the days to come.

According to news reports, Jha has also mentioned that CIL can spare 15,000 crore to the government, provided it gets a decent return on the transaction. However, there is no clarity on the matter. There is also no certainty whether the firm will have to go in for a buy-back or a big dividend.

One positive trigger in future could be if CIL is able to raise prices. However, given where inflation is, analysts maintain it appears unlikely in the near future. After two quarters of strong performance, the company’s September quarter had disappointed investors.

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