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See JSPL, CESC as key beneficiaries of coal block auctions: Harshvardhan Dole, IIFL

in a chat with ET Now, Harshvardhan Dole, Analyst, Power, Institutional Equities, IIFL, shares his views on coal block auctions. Excerpts:



ET Now: I do not you know if you track Monnet Ispat individually or the power business of that company, but do you look at this company at all?

Harshvardhan Dole: No, we do not have an official coverage on Monnet Ispat. But without getting into the deal specifics, one can surely conclude that the intention of a lot of companies who have bid aggressively seems to be ensuring business continuity as the key focus area. Had these companies not had access to the coal mines which they were already having, probably their underlying business would have run into lower PLS or probably would have remain standard for a period of time.

Therefore, the focus seems to get access to the coal to just ensure that the plant keeps running as and when it comes up and ensure that you at least end up continuing the debt servicing. Probably it is not the focus area for a lot of these companies, given the crunch time in the entire sector.

ET Now: So from the two rounds of the coal block auctions, which companies in your view have come out as big winners?

Harshvardhan Dole: If I were to put forward one single company which has emerged as the single largest beneficiary, that surely is Jindal Steel and Power. At least from the power side they have secured two big coal mines and the price that they have paid is not outlandish at all. In fact, the price or rather premium that they have paid is significantly below what we have seen paid by the other bidders. For example, Monnet itself has paid something like Rs 770 per tonne as the royalty for this particular coal block whereas Jindal Steel and Power, Jindal Power their subsidiary have paid about Rs 108 and Rs 128 as royalty for both these coal blocks, which is significantly below the explored price.

The company has emerged far stronger than what it was earlier. So that is one company that has emerged as one key beneficiary. The other surely is CESC.

ET Now: Very interesting. Interesting because when CESC made that bid, the market hammered the stock. We were wanting clarification from Sanjiv Goenka as to why is it that he is putting in such aggressive bids. So on hindsight, would you believe that the correction in CESC has largely been complete because of the bidding and it could be an interesting stock to look at, from an investment perspective?

Harshvardhan Dole: Of course and that is what we have recommended to the institutional holders that if one is willing to take a marginal risk in terms of execution, this is one stock that offers actually good risk reward over the next 24 months or so and CESC is one of our top picks in the sector.

source: http://economictimes.indiatimes.com