Coal India Declines After Antitrust Penalty Order: Mumbai Mover

Coal India Ltd. (COAL), the nation’s biggest producer, fell the most in more than eight weeks after it was fined 17.7 billion rupees ($288 million) for abusing its dominant position.

The shares fell as much as 3.8 percent to 274.95 rupees, headed for the biggest decline since Oct. 11, and traded at 280.70 rupees as of 9:54 a.m. in Mumbai. The shares have declined 21 percent this year, compared with a 8.7 percent gain in the benchmark S&P BSE Sensex. (SENSEX)

The Competition Commission of India found the miner and its units had “undisputed dominance” in supply of power station coal and had unfair supply agreements with some power producers, according to a statement from the federal Ministry of Corporate Affairs. The antitrust body ordered Coal India to modify the agreements.

“Coal India will probably appeal this order at a tribunal, and if upheld, the impact could be about 3 rupees a share,” Abhishek Jain, a Mumbai-based analyst with India Nivesh Securities Pvt., said by phone. “There were complaints by a couple of buyers about the quality of coal supplied and presence of things like stones in the coal.”

Coal India Chairman S. Narsing Rao didn’t answer three calls to his mobile phone today seeking comment on the antitrust commission’s order.

The order was passed Dec. 9 after complaints by Maharashtra State Power Generation Co. and Gujarat State Electricity Corp. against Coal India and three of its units Mahanadi Coalfields Ltd., Western Coalfields Ltd. and South Eastern Coalfields Ltd., according to the statement yesterday.

‘Minimum Quality’

In March, state-owned NTPC Ltd. (NTPC) told Coal India it wouldn’t continue paying for the rocks that came with the coal. It also refused to sign 20-year supply contracts for recently built power plants unless assured of “minimum quality,” NTPC’s Chairman Arup Roy Choudhury said in April.

In response, Coal India reduced supply to two NTPC power plants. On April 4, NTPC wrote to utilities in about 20 states where it provides electricity, warning the dispute could result in a power crisis, according to an e-mailed copy of the letter provided to Bloomberg News.

Coal India and its units on Nov. 13 reported a second straight quarter of lower net income to 30.5 billion rupees in the three months ended Sept. 30. It had 670 billion rupees of cash and 10.9 billion rupees total debt. The group accounts for more than 80 percent of the country’s power-station coal output.

The federal government owns a 90 percent stake in the miner, according to data compiled by Bloomberg. The state is preparing to sell 5 percent by March to help raise money to narrow a widening budget deficit.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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