Coal India OFS opened for retail investors today, after receiving an overwhelming response from institutional investors on Thursday as the government’s 1.5% stake divestment in the coal PSU garnered 3.46 times the bids. However, despite the positive response to the OFS, the secondary markets demonstrated their disappointment, as Coal India shares tanked 4.4% in trade to close at Rs 230 apiece yesterday. Today, Coal India share price fell 0.8% intraday to lows of Rs 228.1 on the NSE. Should retail investors subscribe to the Coal India OFS?
Coal India OFS: Buy
Analysts are unanimously bullish on Coal India shares, recommending that investors place bids for the coal mining PSU. “We remain positive on the company’s prospects from a medium-to-long term perspective. With the company posting the best ever performance in FY23, we believe that the fortunes of the company are slowly turning for the better,” said Manish Chowdhury, Head of Research, Stoxbox. He added that the increased production, strong power demand outlook, and the recent 8% rise in coal prices by the company and steep valuation discount to historical averages, the company has all the right levers to continue with its improved business and financial performance.
“Decent OFS discount, healthy earnings growth outlook and a dividend yield of ~10% provide a good entry opportunity for investors given the 5% fall in stock price post-announcement of OFS. We believe that earnings would get support from strong coal offtake (high demand from thermal power plants) and the recent 8% hike in non-coking coal prices. A valuation of 5.6x FY25E EPS is close to the trough level. Potential stake sale in Bharat Coking Coal Limited (BCCL) and subsequent listing would unlock value. We have a Buy rating on Coal India,” said Abhijeet Bora, Deputy VP – Analyst, Sharekhan by BNP Paribas.
Coal India Technical Outlook
“The current OFS has been timed perfectly from the government’s perspective as Coal India stock price is overbought on the daily charts and a price correction is due. Investors looking for short term returns can subscribe at the floor price for target of Rs 256,” said A R Ramachandran, Co-founder & Trainer, Tips2trade.
Santosh Meeda, Head of Research, Swastika Investmart said that the outlook for Coal India in this fiscal year appears to be bullish, with the bullishness primarily driven by robust power demand in India and supported by the growth of the manufacturing sector and rural electrification initiatives. “We recommend investors to consider participating in this OFS, as we believe the downside risk is limited around the Rs 225 level. On the upside, we see a potential target level of Rs 275. By taking advantage of this offering and carefully assessing the risk-reward dynamics, investors can potentially benefit from the expected positive momentum in Coal India’s performance,” he added.
(Views expressed are analyst’s own. Please consult your financial advisor before investing.)