Can Coal India Break Its 12-Year-Old Jinx?

Coal India Ltd.’s production rose in February helped by improved output at its two subsidiaries. Will that help the state-run company to achieve its production guidance after a gap of 12 years?

The miner clocked a 7 percent production and a 3 percent offtake growth month-on-month in February, aided by normalisation of output at Mahanadi Coalfields Ltd. and South Eastern Coalfields Ltd.

The world’s largest coal miner needs to produce 82.3 million tonnes in the quarter ending March to meet its 610-million-tonne yearly forecast. And it hasn’t met the guidance since the year ended March 2006.

For the offtake or sales guidance, the company needs to sell 61.5 million tonne to meet its target, which is also at 610 million tonne. This implies an 11 percent growth rate in March.

March has been the strongest month for the coal and historic trends for the past five years shows a 10 percent monthly growth over February. Going by historic trends, it may still miss the offtake guidance for the fiscal. Amit Dixit, analyst who tracks metals at Edelweiss Securities, expects it to record 57.7 million tonnes of offtake in March, falling short of the target.

Slowing volume momentum is a cause for concern, according to Gopal Ritolia, analyst at UBS. After a strong first quarter, Coal India's volumes declined in the subsequent quarters, he said.

Morgan Stanley’s Ashish Jain is, however, optimistic that Coal India’s volume growth should gradually improve.