Coal India Ltd (CIL) seems to be in a quagmire. The government’s move to allow 100% foreign direct investment (FDI) in coal mining has dented the market’s enthusiasm in the stock. Its shares tanked 3.7% after the announcement. That said, the stock has been sliding since June 2019 and is near its all-time low now, despite having what can be said to be a decent dividend yield.
FDI is not the only concern though. International coal prices have fallen by 20-30% in the past year, note analysts. Both low realizations and the 100% FDI in coal mining are seen as factors that could keep domestic coal prices under pressure, going forward.
However, that might not be the case. Domestic coal prices are already quite low than landed prices. Besides, CIL’s realizations from fuel supply agreement sales are about 37% lower than e-auction realizations.
