- 22 Oct 2024
- ICICIdirect Research
GOVERNMENT WILL BE ESTABLISHING COAL EXCHANGE TO FACILITATE COAL TRADING
News: As per media sources, the government is aiming to establishing India’s first coal trading exchange, which will facilitate more sellers and buyers to trade coal as a commodity. This will be function under the supervision of the Coal Controller Organization (CCO). It is expected to feature an online trading platform with a clearing and settlement mechanism to streamline coal availability.
Views: This introduction of the coal exchange is expected to enhance coal pricing transparency, likely attracting additional buyers and driving overall demand for coal. However, this will increase the price competitiveness, thereby putting downward pressure on e-auction volumes and realisations, which is currently the company’s most profitable segment. As a result, this can potentially lower the earnings growth in the future. The stock however remains attractively valued, trading at less than <5x EV/EBITDA on forward basis, and offers a healthy dividend yield of ~5%.
Impact: Negative