Coal India shares jumped as much as 5.2 per cent on Wednesday after the state-run miner said it will pay a special dividend of Rs 29 per share in the current fiscal year. The world's largest coal miner by output had paid a total dividend of Rs 14 a share in the previous fiscal year.
As of 09.30 a.m., the stock traded 2.5 per cent higher at Rs 295.95 on the NSE after earlier hitting a high of Rs 307.85. Coal India shares were the top gainers on the 50-share Nifty benchmark.
Goldman Sachs said the payout of excess cash will lead to a significant re-rating of the stock. Coal India is a cash rich company and had cash balances of Rs 64,270 crore at the end of September quarter, the second among Indian corporates after energy major Reliance Industries.
Domestic brokerage Kotak raised Coal India to "add" saying the 10 per cent dividend yield valuations is hard to ignore.
However, Ambit Capital's Andrew Holland told NDTV that the excitement will be over by the day and prices will go down.
"The fundamentals of Coal India are not very great. You cannot buy the stock, you will be hostage to what the government wants to do," he added.
Coal India, which accounts for 80 per cent of India's coal output, has missed production targets for several years and its growth hobbled by a lack of investments on modernisation and delayed approvals of its mining projects.
Avinnash Gorakssakar of miintdirect.com said the dividend will help the government more than the retail investors.
"Sure, there is short term benefit, but in the long term there could be more worries because margins are under pressure and there is a strong visibility on volumes. The stock has strong resistance at around Rs 320-325," he added.
Government to be the biggest beneficiary:
The government's 90 per cent shareholding in the company will fetch it about $2.7 billion and will help the cash-starved government narrow its fiscal deficit.
India's slowing economy and rising subsidies on food and fuels have pushed the government into a corner, with fiscal deficit for the April-November period rising to $82.3 billion, or nearly 94 per cent of the full-year target.
(With inputs from Reuters)
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