The non-executive workers of Coal India (CIL) affiliated to the five central trade unions have deferred their planned 3-day strike (Sep 23-25) to mid-December (Dec 17-19).

In a statement, the Secretary General of the Indian National Mine Workers’ Federation, the largest of the 5 unions, stated ‘the opposition of the unions to stake-sale and proposed restructuring is still there, but given the economic situation of the country, they are deferring the strike as the unions did not want to spoil the mood of the investors at this moment.’

CIL’s director has stated ”the unions deferred the strike to December after CIL agreed to some of their demands relating to VRS (Voluntary Retirement Schemes) and other issues. The divestment to go through now.”

Commenting on the same, Nomura Financial Advisory and Securities said, ”Media reports CIL management would facilitate further discussion with the government on the divestment and restructuring front, but the unions are now reconciled to the 5% divestment; and [2] proposal for a 5% share buyback has already been discussed informally by the CIL board but the matter is yet to be taken up formally.

Worker’s unions will likely drive a hard bargain (once again) while negotiating upon the annual ‘festival bonus’ – the bonus was hiked by 24% in FY2013 to Rs 26,000/employee. A similar hike this time around would entail an outlay of Rs 11 billion (4% of CIL’s FY13 employee cost).

If no interest is payable on the eventual PRP arrears (as approved by the Government), CIL’s P&L wouldn’t be hit incrementally, but it would entail a cash outgo.

We expect near-term price performance to remain weak as the disinvestment overhang plays out over the next few months. We are in the process of completing our meetings with CIL and related ministries – our earnings estimates for CIL are under review. On our current normalized earnings estimates (adjusted for OB removal adjustment and excluding potential incidence of a mining tax), the stock trades at FY14F 9.3x P/E and 4.9x EV/EBITDA.”

It has maintained ‘Buy’ on Coal India (Q,N,C,F)* with target price of Rs 398 as against current market price (CMP) of Rs 302 in its report.

Courtesy: my iris