Coal India Gains Most Since Debut on Modi Optimism: Mumbai Mover

Coal India Ltd. gained the most in Mumbai since its trading debut more than three years ago on optimism a new federal government will remove obstacles to increase production at the world’s biggest miner of the fuel.

The shares of the state-run company rose as much as 14 percent to 392.50 rupees, the most since Nov. 4, 2010 and traded at 388.10 rupees as of 1:32 p.m. local time. The shares have advanced 34 percent this year, compared with a 15 percent gain in the benchmark S&P BSE Sensex.

Prime Minister-elect Narendra Modi’s government should focus on building railway infrastructure, helping plug a supply shortfall and curb imports of coal, Chirag Shah, an analyst at Barclays Plc in Mumbai, wrote in a May 16 report titled ‘Material Modi-fication’. Deregulation and opening up the coal sector to private investment will bring efficiency in state-run companies, the report said.

India’s coal production has lagged behind demand as the state monopoly faces delays in getting land and environment approvals, while mines with a potential to meet the shortfall lack railway connectivity. Modi, set to lead the nation after his party’s election victory, has been vocal about the need to reform the coal industry, stoking expectations his government will work to remove the hurdles.

“We highlight that fast-tracking some of the critical evacuation infrastructure by the new government could provide sharp volume growth over the next fiscal year,” Shah, who has an overweight rating on the stock, wrote in his report. “This should also significantly help in reducing the country’s import bill.”

India’s coal imports are expected to grow at 9 percent annually over the five years ending March 2017, leading to an unsustainable import bill, according to Shah’s report.

Coal India plans to invest 75 billion rupees in a 203 mile (327 kilometer) railway network to produce 300 million metric tons of coal from mines in the states of Jharkhand, Chhattisgarh and Odisha, helping eliminate the need for imports, Chairman S. Narsing Rao said in February last year.

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