Edit this postCoal India dipped over 8% at Rs 362 after the Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee approved the new draft Mining Bill. Can we call this a systemised design to kill a budding stock?
According to Mining Bill, coal companies will have to share 26% profit with the local population. In case of other minerals such as iron ore, bauxite and limestone, the miners will have to share with the locals an amount equal to the royalty paid in the previous year. The most affected company would be Coal India, whose profit could go down by 35%. According to Citi, the impact on Coal India’s PAT would have been 40% had the 100% royalty sharing been applicable to the company as well. Analysts at Citi say, “Though early days, if the Bill is passed in its current form, we believe CIL is likely to either (1) ask for an offset against their corporate social responsibility expenses; and/or (2) pass on the additional burden.” CIL currently passes on its royalty burden to end users.
The trading volumes on the counter surged more than ten-fold with 24.1 million shares changing hands on both the exchanges.
Thus govt policies and political situation needs to be always kept under surveillance as it helps to gauge the likely trend prevalent and future course of action for a stock.
