Coal India - Higher bonus payout of 40% y/y financial impact not high, but in the year of wage hikes, setting a trend? : JPMorgan,

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 Bonus payout settled at Rs21K/employee, implying 40% y/y
increase: As per the latest media reports available (Dow Jones,
Bloomberg), after a meeting with the Coal Minister and the employee
unions, Coal India (COAL) has agreed to hike the bonus payout to Rs
21K/employee from the earlier Rs17K/employee (last year
Rs15K/employee). The financial impact from the increase of Rs4K on
roughly 370,000 employees is Rs1.5bn (as per the chairman it would be
Rs1.44bn) and against a full year wage bill of Rs182bn of FY11, the
incremental amount is ~1%. The increased bonus amount would flow
though the P&L over the next 3 quarters. As per the media reports (TOI),
the union demand was Rs22.5K-23.5K/employee.
 Recent strike on the same issue cost company Rs2.5bn: We believe
the most important takeaway from the entire issue is how the saga has
played out and the possible readings for the more critical wage
negotiations which are currently under way. COAL had earlier agreed to
a roughly 13% increase in bonus, and on this the unions went on a one
day strike on Oct 10th. Then came newsflow of severe disruption of coal
supplies to various power plants (mainly one off issues), post which the
Coal Minister met the unions today and the company agreed to hiking the
bonus to Rs21K. While the 40% increase in bonus does not mean that the
wage increase will be at similar levels, we believe the wage negotiation
could be contentious and given the coal crunch currently being seen in
the country, management could be more focused on ensuring production
is not hit.