Shares of Coal India opened lower but quickly climbed over 2 percent on the BSE on August 29, a day after the Union Cabinet approved 100 percent foreign direct investment (FDI) under the automatic route in coal mining and also in the creation of associated infrastructure.
Analysts believe the FDI push was much needed and will help build an efficient and competitive market, while bringing down coal imports as well.
"The move would attract international players to create an efficient and competitive market and also help in reducing coal imports," the brokerage Sharekhan said.
However, the move was slightly negative for Coal India in the long term, the brokerage said.
"Coal India would continue to supply the majority of coal requirements of India with its target to produce 1 billion tonnes of coal by FY25 (from 607 million tonnes in FY19) but the likely entry of new players may impact coal realisations in the long term," it added.
As the development of coal mines will take time, there is no major near-term risk for the state-run miner.
"The initiative is a welcome move but we are still some time away from merchant coal mining, given the overarching presence of Coal India, shortage of rakes, time taken for land acquisition and various approvals from local, state and central governments. We do not see any near-term risks to Coal India because of this decision," brokerage Emkay Global Financial Services said.
The brokerage has a buy recommendation on the stock, with a 12-month target price of Rs 296.
The scrip opened at Rs 182.90 against the previous close of Rs 185.20 and touched the intraday high and low of Rs 189.15 and 182, respectively.
At around 1015 IST, the stock was trading Rs 2.30, or 1.24 percent, higher at Rs 187.50.
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