- 15 Jul 2024
- ICICI Securities
COAL INDIA IS PLANNING TO EASE THE E-AUCTION NORMS
COALINDIA - 361 Change: 1.00 (0.28 %)News: Coal India has informed the exchanges that it has circulated the concept note to its e-auction coal bidders wherein it has proposed measures to ease the bidding process i.e. 1) introducing a three-hour auction window to replace the previous long-drawn process 2) allowing consumers to change their mode of transport from rail to road after bidding without paying an additional premium 3) permitting a single bidder to place up to four bids against each basket, instead of the previous limit of one bid 4) lowering the earnest money deposit (EMD) from ₹500 per tonne of coal to ₹150 per tonne. Additionally, the company has directed all its subsidiaries, except Northern Coalfields Limited, to offer up to 40% of their production in e-auctions during Q2FY25 and Q3FY25. It has also provided subsidiaries with the flexibility to set reserve prices based on factors such as local demand and supply, coal stock at mines, and results from previous e-auctions vs. the existing framework of mark-up to notified prices (FSA price).
Views: The ongoing process of relaxing rules in its most profitable segment—such as changing allocation methodology, capping auction hours, and adjusting transport premiums—will enhance Coal India's efficiency and allow it to meet coal demand from a broader range of bidders, including those with limited capital. Additionally, increasing the production volume available for e-auctions in subsidiaries companies is expected to result in higher realizations and margins improvement for the company in the current financial year. We maintain a positive view on Coal India, driven by the company’s ambitious goal of achieving 1000 MT of coal production by FY26, investments in new technology domains such as coal gasification, inexpensive valuation, and healthy dividend yield.
Impact: Positive