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    Coal India

    COALINDIAStrong
    Oil, Gas & Consumable Fuels·8 Sept 2022
    Management Summary

    Coal India's CMD Pramod Agrawal led the Q1 FY23 call with confidence, highlighting improved profitability from higher production volumes reducing per-tonne costs and strong e-auction premiums amid elevated international coal prices. The company reaffirmed its 700 MT FY23 target and 1 BT by FY25 ambition. E-auction premiums remained exceptionally high at up to 300% in some cases, though management expected these to sustain given strong power demand and imported coal price linkage.

    Highlights

    8

    • Profitability improved significantly due to increased production reducing cost per tonne and higher e-auction realizations

    • E-auction realizations at Rs.4,340/tonne in Q1; premiums reaching 300% in some cases with e-auction prices at Rs.4,500+

    • Production target of 700 MT for FY23 reaffirmed; 1 BT target by FY25

    • Wage provision of Rs.100 crores/month; negotiations ongoing for non-executive wage revision

    • Capex of Rs.16,500 crores targeted for FY23 vs Rs.15,500 crores in FY22

    • E-auction volume of ~20 MT in Q1; expected 80-90 MT for full year

    • Receivables increased from Rs.11,000 to Rs.14,000 crores in Q1 but reduced by Rs.1,000 crores in August

    • MDO contracts awarded for ~100 MT capacity; expected production by FY24-25

    Key financials

    Metrics

    6

    Periods

    4

    Headline

    2
    • Employee Count
      2,45,000 employees
      YoY-5%
    • Receivables Q1
      ₹14,000 Cr

    Q1

    2
    • E-auction Realization
      4,340 Rs/tonne
    • E-auction Volume
      20 MT

    FY22

    1
    • Capex
      ₹15,500 Cr

    FY23

    1
    • Capex Target
      ₹16,500 Cr
      YoY+6.5%

    Segment breakdown

    Underground vs Open-cast
    1,00,000 employees Underground Workers1,45,000 employees Open-cast Workers
    List

    Guidance & targets

    4
    CategoryTargetPriority
    Production
    FY23 Production
    700 million tonnes
    		High
    Production
    1 BT Target
    1 billion tonnes
    		Medium
    E-auction
    FY23 E-auction Volume
    80-90 million tonnes
    		Medium
    Employee Cost
    Wage Provision
    Rs.100 crores/month increasing from Q3
    		Medium

    Risks & concerns

    5
    RiskSeverity

    SECL production underperformance at key mines Kusmunda, Gevra, Dipka

    Land issues at 1-2 villages still pending; Q1 production grew 35% but SECL remains the key risk subsidiary — Both acknowledged

    medium

    High receivables increase of Rs.3,000 crores QoQ to Rs.14,000 crores

    Driven by 20% higher power supply volumes; reduced by Rs.1,000 crores in August; will be controlled from October — Analyst acknowledged

    medium

    Coking coal self-sufficiency remains distant due to ash content and hardness limitations

    Indian coking coal can only substitute 25-30% with stamp charging, 10-15% without; 50 MT coking coal imports likely to continue — Analyst acknowledged

    low

    Coal gasification projects facing repeated tender failures

    New model being tried as Coal India doesn't want technology risk; no successful bids yet — Analyst acknowledged

    low

    Areas of Evasion(1)

    • Wage negotiation details withheld to protect negotiating position

    Q&A highlights

    3

    “We are selling 90% of our coal on SSC etc which is tied-up coal and there is hardly any profit on that...In our case, there is hardly any windfall profit”

    Addresses market concern about potential government intervention on e-auction profits; management argues e-auction is only 10-15% of total volume

    asked by Pinakin Parekh

    1 min read4 chapters

    Detailed Narrative

    01

    Strong Q1 Driven by Efficiency and E-auction

    Q1 FY23 saw improved profitability despite higher diesel and explosive costs, as increased production volumes reduced cost per tonne. E-auction realizations averaged Rs.4,340/tonne with premiums reaching 300% in some cases. The company maintained that these are not windfall profits since 90% of coal is sold on regulated FSA prices. Full-year e-auction target of 80-90 MT.

    02

    1 Billion Tonne Ambition and Infrastructure

    Management reaffirmed 700 MT target for FY23 and 1 BT by FY25 though admitted it may slip to FY26. MDO contracts awarded for ~100 MT including Siarmal (50 MT), Chandragupta, and Kotre Basantpur. Railway infrastructure progressing with Tori-Shivpur third line, Jharsuguda-Sardega doubling, and 35 FMC projects on track for March 2024 completion.

    03

    SECL Recovery and Operational Challenges

    SECL, the largest subsidiary, faced land issues at major mines Kusmunda, Gevra and Dipka. Kusmunda and Gevra resolved; 1-2 villages pending at Dipka. Q1 production grew 35% YoY but consistent execution needed. Heavy rains in last 15 days affected recovery trajectory. Management expects strong October onwards performance.

    04

    Diversification and Solar Investments

    Solar target of 450 MW self-consumption with 12%+ IRR assured. Coal gasification with BHEL and GAIL JVs in progress but tender responses remain poor. Alumina project still on drawing board. HURL Gorakhpur plant started; Talcher Fertilisers delayed 18 months. Management insists on minimum 12% project IRR for any new investment.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.