India’s ongoing energy crisis is helping Coal India’s shares overcome the two-year slump and it could go up further

• Coal India’s shares were trading at ₹206.1 at 1:13 p.m., on April 21.
• The situation at Indian power plants remains grim with nine days’ worth of coal stock, Nomura said earlier this week.
• Analysts expect Coal India stock to benefit from the rise in demand and breach ₹230 in the near future.

The share price of Coal India Limited (CIL) reached a two year-high earlier on Thursday despite the excessive shortage of coal in the country at the moment. The company’s shares were trading at ₹206.1 at 1:13 p.m., on April 21.

Coal India currently sits on a market cap of ₹1,26,890 crore (₹16 billion).

The development comes only two days after a report by Japanese financial services firm Nomura highlighted that the coal inventories held by the Indian power plants remain tight at nine days’ worth of stock as of mid-April and it could result in power outages.

The report, titled ‘India: A power crunch in the making’, also noted this coal shortage could lead to another “stagflationary shock” if the situation does not improve. Besides this, it could also result in diversion of coal from non-power sectors like aluminum, cement, steel, weighing on industrial output and this could increase the cost of electricity.

The nine day worth of stock is much lower than the average stock of 17 days held in April over the last five years. Nearly 100 out of the 172 power plants in India have critical coal stocks, which means it is less than 25% of the normative levels.

“This shortage of coal and high prices are benefiting the Coal India stock prices. Analysing the recent volume price action, the volumes have been encouraging in the recent up move indicating strong hands have started accumulating the stock at current levels and may touch the levels of 230 in near future,” Ravi Singh, vice president and head of research at Share India, told Business Insider.

While Singh expects Coal India’s share price to cross ₹230 in the near future, Proficient Equities’s Manoj Dalmia expects it to breach ₹268 in the mid-term horizon. Dalmia, founder and director of Proficient Equities, too cited the rise in demand for coal and reduction in supply as reasons behind Coal India’s recent uptick on the stock market.

India had witnessed a similar crisis in October 2021 when the country’s stockpiles fell to the lowest point in years. At that time, India only had coal inventories worth five days. However, this time the situation was worsened by the high demand of electricity and the supply chain description caused by the ongoing Russia-Ukraine conflict.

The government of India, since October, has been aggressively trying to increase coal production via commercial auctions, allowing sale of excess production, rolling auction and speeding up operationalisation of coal mines.

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