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Oh I see. Thanks for correcting. New concept I guess will take sometime to grasp. Though got the basics cleared.
Refer to the SENSEX composition in the following chart
For each stock it's non-promoter shareholding is considered as the free-float. In other terms which can be readily traded in the market. So in spite of LIC holding 19% in L&T, you see a 90% free float for L&T as LIC have no lock-in on these shares and they can be sold in the market.
The relative weight of each stock (free float X Mcap) is used to determine their weight in the total free float market cap, which is the Sensex market cap.
So as company's share price increase or decrease, their weights get automatically adjusted. The figure you see is the weights as on closing of 17.08.2011.
During 9-3:30 the Sensex is computed at real time basis, based on stock prices of constituents.
For e.g. ICICI Bank contributed 64 points and Infosys contributed 52 points in today's fall of 371 points for the Sensex.
Refer to the SENSEX composition in the following chart
For each stock it's non-promoter shareholding is considered as the free-float. In other terms which can be readily traded in the market. So in spite of LIC holding 19% in L&T, you see a 90% free float for L&T as LIC have no lockin on these shares and they can be sold in the market.
The relative weight of each stock (free floatX Mcap) is used to determine their weight in the total free float market cap, which is the Sensex market cap.
So as company's share price increase or decrease, their weights get automatically adjusted. The figure you see is the weights as on closing of 17.08.2011.
During 9-3:30 the Sensex is computed at real time basis, based on stock prices of constituents.
For e.g. ICICI Bank contributed 64 points and Infosys contributed 52 points in today's fall of 371 points for the Sensex.
Thanks again for the details.
Also I heard today on news channel.
For coal india, 90% stake is still with promoters and out of the rest 10%. 6.5% is with FII's.
Also all brokerage house like morgan stanley, goldman sachs, credit sussie,please research have given out-performance rating with target ranging from 430 to 487.
Please google for same as i heard it on news channel. Anyways i'll hold my holding life time or when in need of money.
There is an important point that this discussion missed. There is wage revision that is due to the employees of Coal India along with the impact of the mining bill. It's still speculative whether or not the wages will be increased 100% for the employees but that is the worst case scenario. Also as a Diwali bonus that has been remitted to the employees, CIL incurred Rs 144 crore.
Having said all this, as there is severe coal shortage for power, steel and infra companies, this might lead to price increase. But what Coal India suffers from is the government and environment policies hurting the interest of the company.
Having said all this, as there is severe coal shortage for power, steel and infra companies, this might lead to price increase. But what Coal India suffers from is the government and environment policies hurting the interest of the company.
No doubt there is severe shortage of coal in India.
However, the government also has to worry about inflation.
Every time prices of coal are increased, there is an upward pressure (cost pressure) on prices of power and commodities.
The government can go to any extent to control inflation. The condition of the oil marketing companies is a perfect example of this.
These companies have been brought to the verge of insolvency just because the government wants to keep prices of petrol and diesel under control.
Coal India is profit making and I won't be surprised if the government continues to artificially suppress coal prices to keep inflation under control.
This quarter half of Coal India's profit has come from "other income". Most of this other income is interest that Coal India received on its cash balance of Rs 55000 crore (consolidated).
From the consolidated income statement of Q4:
Profit from operations before other income: Rs 1904 crore.
Of course, Coal India can't repeat the SKS Microfinance story.
However, one should not underestimate the wealth-destruction capabilities of Indian politicians (I mean wealth of others and wealth of the nation, not their own).
Fiscal deficit and inflation are very serious problems for the Indian government. The government can go to any extent to keep these two down.
Government is already eying Coal India's huge cash reserves and a buy-back is being considered.
(My personal opinion is that a dividend would be a better option because the buyback won't be fair to all shareholders).
Power sector is under pressure because of rising costs and stagnant tariffs. To provide some relief to the power sector, the government may force Coal India to keep down prices for a very long period.
Don't forget that Coal India operates in a fully-regulated environment.
Land allotment, production targets, salaries, coal prices etc - everything that affects Coal India is subject to government's orders and approvals.
Of course, Coal India can't repeat the SKS Microfinance story.
However, one should not underestimate the wealth-destruction capabilities of Indian politicians (I mean wealth of others and wealth of the nation, not their own).
Fiscal deficit and inflation are very serious problems for the Indian government. The government can go to any extent to keep these two down.
Government is already eying Coal India's huge cash reserves and a buy-back is being considered.
(My personal opinion is that a dividend would be a better option because the buyback won't be fair to all shareholders).
Power sector is under pressure because of rising costs and stagnant tariffs. To provide some relief to the power sector, the government may force Coal India to keep down prices for a very long period.
Don't forget that Coal India operates in a fully-regulated environment.
Land allotment, production targets, salaries, coal prices etc - everything that affects Coal India is subject to government's orders and approvals.
Buy back means government increasing it stakes in stock. Hence the price of share will increase as more less stock will be there in market right? I know even 10% of Coal India stocks are free floating but that too is in crores.
Buy back means government increasing it stakes in stock. Hence the price of share will increase as more less stock will be there in market right? I know even 10% of Coal India stocks are free floating but that too is in crores.
What is being proposed by TCI is that the Govt sell a chunk of its shares to Coal India. Link here
Suppose Coal India now has 100 shares in all.
Govt 90 Stake : 90%
Others 10
Total Profit (say) 5000 Rs . So EPS = 5000/100 = 50 Rs
Now if Coal India buy back 18 shares (20% of holdings) from the Govt. These would be ultimately extinguished.
So then Coal India will have 82 shares in all
Govt : 72 Stake : 87.8%
Others : 10 Stake : 12.2%
Total Profit (say) 5000 Rs . So EPS = 5000/82 = 60.97 Rs
So due to the higher EPS the stock price will go up, also the free float increases which will add liquidity to the stock and make it a meaningful contributor to the index.
What is being proposed by TCI is that the Govt sell a chunk of its shares to Coal India. Link here
Suppose Coal India now has 100 shares in all
Govt 90 Stake : 90%
Others 10
Total Profit (say) 5000 Rs . So EPS = 5000/100 = 50 Rs
Now if Coal India buy back 18 shares (20% of holdings) from the Govt. These would be ultimately extinguished.
So then Coal India will have 82 shares in all
Govt : 72 Stake : 87.8%
Others : 10 Stake : 12.2%
Total Profit (say) 5000 Rs . So EPS = 5000/82 = 60.97 Rs
So due to the higher EPS the stock price will go up, also the free float increases which will add liquidity to the stock and make it a meaningful contributor to the index.
Does it mean right now coal india doesn't have its own shareholding and all is with government?I thought holding with coal india and holding with government both means same.
Inflation, mining laws, rain, environmental clearances, labour issues, transparency problems,slow government processes are all negative triggers for Coal India.
The employees of coal India themselves haven't bought the shares of the company during IPO even after the company themselves gave a discount to its employees.
The only positive is the shortage of coal where again government intervention can kill the natural supply-demand pricing.
Too many people have invested in this company hoping for it become another bellwether stock but the wait will be very slow is what Im guessing..
The employees of coal India themselves haven't bought the shares of the company during IPO even after the company themselves gave a discount to its employees.
It's not because they didn't want to. It was because the union threaten them of dire consequences. And only 10% of that quota was filled. They were against disinvestment thinking if they don't apply the ipo won't subscribe.As soon as it was listed all employees were crying how the union mess up an opportunity to them.
Also in dna money today front page it's mentioned as the number 1 company sitting on huge pile of cash and equity worth 55000 crore more than RILs 36000 crore.
Also it's not any other company it's the world's biggest coal company.And also the stock is not at ril,sbi,tcs level trading at 500+ levels. Any harm at most will drag it upto ipo levels or up to 200 atmost I feel.
It's not wrong to bet on this company I feel.
Last edited by magnet : 14th November 2011 at 05:24 PM.
So due to the higher EPS the stock price will go up, also the free float increases which will add liquidity to the stock and make it a meaningful contributor to the index.
You will have to adjust the eps for post-buyback reduction in interest income.
Quote:
Originally Posted by magnet
Does it mean right now coal india doesn't have its own shareholding and all is with government?I thought holding with coal india and holding with government both means same.
What am I missing?
A company cannot own its own shares.
Sometimes companies do hold their own shares for a very brief period as "treasury shares", but that is very rare.
There is little doubt that Coal India would witness a positive impact of Rs 1,500 crore on the bottomline in the next quarter on account of the new pricing mechanism
I expect the government to constantly pressurize Coal India to keep coal prices low. If Coal India has to show serious growth, it will have to come from volume growth and not price growth.
Other issues related to employee wages, land acquisition and the mining bill remain as before.
If one wishes to exit this stock in future at some target say 350,400 or even 500, which other government company one should look for?
I have invested around 50000 sum during IPO and have kept it for 25 years self lock in or if needed.
But these days in Dna newspaper I came across articles about all its subsidiaries doing illegal stuffs like keeping their explosives stock open in naxal area.
I am getting a feeling in very long run I won't get much appreciation by sticking to this stock.
Which are the other stocks I should have a watch in public sector?
I wish not to have position more than 50 shares in Coal India from my present position of 250 shares.
Last week, Coal Minister Sriprakash Jaiswal had said that that Coal India's new pricing mechanism will be reviewed on January 20 and will come out with a solution in the next seven days so that the increase in rates is not more than required.
"Price fixed by them (CIL), in my opinion, is more than required," Jaiswal had said.
This article published on firstpost.com suggests that Coal India should be delisted from the exchanges.
Quote:
The government has repeatedly placed obstacles in the regular functioning of Coal India. Perhaps it’s better the government delist the company — then it can interfere all it wants in the company’s operations without harming the interests of minority shareholders.
If one wishes to exit this stock in future at some target say 350,400 or even 500, which other government company one should look for?
The primary goal of every promoter in the private sector is to maximize profits - either for his company or for himself.
A good promoter always tries to maximize his company's profits (in all legitimate ways). A bad promoter always tries to maximize his own profits (in all legitimate and illegitimate ways).
However, in case of public sector companies, "profit" is not always the primary goal.
That's the main risk for minority investors of public sector companies.
If you want to invest in public sector companies, please keep in mind that the promoter of these companies is more a socialist and less a capitalist.
The government is not allowing its shareholders to earn more and trying to provide coal at cheaper rates to its companies.
Hence one of the larger investors from Uk holding 1% stake in coal india accused Coal India of not working for shareholders but working on behalf of government.
In short term share will fall. It enjoys monopoly in its field but again giving high profit number is far away story now. And even if it does government trying to make it pay huge dividends so that indirectly it gets its disinvestment money via dividend as it holds more than 90% stake in it.
Q: How do you think Coal India will pan out? No consensus was arrived on FSAs at the board meeting.
A: I think ultimately the FSA has to stand. If you take a broader view, ultimately we are concerned about 50 million tonnes of production. Coal India has a production of 450 million tonnes.
Coal India moved from useful heat value to gross calorific value system from January 1, 2012. It's so difficult for Coal India to ramp up production because the extra 50 million tonnes needs to be provided to the power generator by March 2015.
So it is inadequate even if you have a normal increase of 5%-6% in production every year. A coal washery alone can solve that problem.
I don't understand why the structural issues are not solved at the Coal India level. Are we talking of the stagnation of the production of Coal India at 450 million tonnes over the next 3 years?
A lot of hue and cry has been made on FSA and about the severe penalty if the 80% supply is not made. So, I don't think that this is really such a serious issue.
On the other side of the coin, setting a production which factors in an increase of about 5%-6% per year could prove beneficial and is very much feasible. But the environmental issues need to be sorted out. All issues are going to get amicably resolved and could be positive for the stock in the future.
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