At a time when production increases are becoming difficult, the public sector Coal India Ltd (CIL) is keen on increasing its product prices in order to protect its margins which are coming under increasing amount of pressure due to the inflationary spiral.

This was among the issues discussed following concerns expressed by overseas investors of the newly-listed CIL on production and profitability, at a conference call this week after the declaration of the third quarter results of CIL which was done for the first time, in accordance with the requirements of Clause 41 of the Listing Agreement.

The shares of the public sector behemoth were listed on November 4 last year on the BSE and the NSE following an initial public offering of 10 per cent of CIL's equity in October 2010. The IPO raised a record Rs.15,400 crore which went to the government kitty.

Overseas investors, including major funds, who had given an overwhelming support to the issue, shared the moratorium on production brought about by environmental issues, sources connected with the development said, adding that they were told of the management actions that were being taken in this regard. However, their biggest concern seemed to stem from the likely impact of the low growth in output on CIL's bottom line. The company reported a post-tax profit of Rs.2,626 crore but margins were under pressure during the quarter with net profit (as percentage of sales) showing a drop as compared to last year. Salaries and wages too were up and this component of CIL's production cost will rise further since another round of wage negotiation falls due from June 2011.

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