Apply Coal India IPO : Ventura
Each brokerage is giving different reasons for recommending Coal India IPO. Here are Ventura Securities's reasons. But I yet to decide. This Euphoria just remind me of the mass hysteria prevailed on Reliance Power. But the thing is that Coal India is having a solid business ( nearly Monopoly) with huge, huge positive cash flows and Reliance Power had nothing but empty promises and merchant banker endorsed business plans. I am positive about this company. Though short term gains are uncertain, In the long run (over 3-5 year period), your investment would double. Thats why most of the Insurance companies are scrambling to subscribe this issue. Do remember that your payment is going to Govt. of India not to the company.
Coal India Ltd (CIL) is the largest coal producing company in the world based on its raw coal production of 431.26 mn tons in FY10 and has an 82% share in the domestic coal production market. It is also the largestcoal reserve holder in the world based on its reserve base as of April 1, 2010. With India being the world's third largest producer and consumer
of coal, CIL accounted for approximately 81.9% of coal production in India in fiscal 2009. CIL is one of the lowest cost producers of coal globally (US$16/ton) which has enabled it to maintain healthy margins despite selling coal at a huge discount and thus uphold robust revenues and profitability.
Valuation & Recommendation
At the higher end of the price band, the stock is being offered at 14.1x and 12.5x consensus EPS estimates of Rs 17.4 FY11E and Rs. 19.5 FY12E. The stock is reasonably valued and is better than the one year forward P/E of 19x FY11E and 17x FY12E of Sensex and thus we recommend investors to SUBSCRIBE the issue.
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