The three maharatna companies Coal India limited (CIl), Oil and Natural Gas Corporation (ONGC) and National Hydroelectric Power Corporation (NHPC) slated for Government most ambitious disinvestment programme to mop up Rs 43,000 crore, has lost its market capitalization by around Rs 1,20,000 crore since they made its 52-week high on 11th June.
The share price of Coal India alone has dropped by 20 per cent from the time it made its 52-week high of Rs 423.70. On the other hand, the benchmark index CNX Nifty gained by more than 5 per cent from 7,700 on 11th June till Tuesday. Shares of ONGC and NHPC both have slumped by 13 per cent and 32 per cent respectively during the same period. It is a matter of co-incidence when all these three companies made their all-time high on 11th June and after that the shares started plummeting.
Mayur Matani, analyst with ICICI Securities says, one reason for the falling prices could have been that the market expects these issues will be offered at a discount to their prevailing market price.
Since the Government has refrained from specifying when the three issues will hit the market, many are wondering how they should play these stocks.
“Although these stocks remain good long term bets, but each and every company has different trigger points and dynamics,” Mayur added.
The Cabinet Committee on Economic Affairs (CCEA) on September 10th cleared a 10 per cent stake dilution in Coal India, 5 per cent in oil production major ONGC and 11.36 per cent in power company NHPC.
The Government expects to fetch more than half of its target of around Rs 23,000 crore from Coal India limited disinvestment alone. But reducing the e-auction by half had hit the stock hard.
Piyush Goyal, Coal and Power Minister, had earlier directed Coal India limited to cut its e-auctions by more than 50 per cent to 25 million tonnes in 2014-15 from 58 million tonnes last year. Officials say CIl’s loss of revenue due to lower e-auction sale would be around Rs 1,800 crore this year. “We were not in favour of cutting down e-auctions,” the official added.
Coal India is the largest coal producer in the world with the production of 462 million tonnes in FY 2014 and the reserves of 80.9 billion tonne.
The company sells about 10 per cent of its production through the e-auction route, from where it makes huge margins.
Arihant capital analyst in its report says that “It is very import for Coal India to maintain its profitability before the stake sale. Although CIl sells coal at about 50 per cent discount to international prices, it has healthy EBIDTA margins of more than 20 per cent.”
In 2013-14, CIl earned Rs 12,767 crore from e-auction sales, with average realisation of Rs 2,196 a tonne. This was 14 per cent higher than the Rs 11,148 crore in 2012-13.
The country’s largest oil and gas producer ONGC says that it has taken various measures to arrest natural decline that has set in its ageing fields and will also ensure in bringing on newer discoveries. During 2013-14, 84.99 million tonnes of oil and oil equivalent gas reserves were accreted, the highest in last 23 years.
ONGC posted a net profit of Rs 4,781.79 crore for the quarter ended June 30th 2014 as compared to Rs 4,015.98 crore during the corresponding period last year.
The Dalal Street has battered the stock of NHPC since the announcement of stake sale. The company’s earnings have been hit by expenses pertaining to their stalled projects.
According to Emkay Global Financial Services limited, about one-fifth of the book value is invested in projects that are stuck. Return ratios can improve if profits rise but that is possible only if large projects such as lower Subansiri and Parbati II start producing power.
NHPC reported a 14 per cent decline in net profit at Rs 616.03 crore in the three months ended June 2014, mainly on account of higher finance costs.
VSNl was the first CPSE to be divested by way of a Public Offer in 1999-00 and Coal India Public Offer in 2010-11 has been the largest CPSE IPO, raising Rs 15,199 crore.