Saturday, June 11, 2011

Coal India wage revision due in July

Given inflationary pressures, Coal India will have to raise wages. This is due in July. In FY11, wage costs accounted for over 50% of total expenditure.
Assuming a conservative average hike of 15%, operating margins can then erode by 600 basis points. The company faced a similar problem last year and had to reduce its manpower by 13,000.
Coal India's stock price rose 30% in the last three months. After the announcement of March 2011 quarter results, the stock price vaulted 4% to Rs390. This price factors in all the positives leaving little room for further upside.

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