Post on 06-Oct-2020
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KEY DATA
Rating BUY Sector relative Price (INR) 116 12 month price target (INR) 165 Market cap (INR bn/USD bn) 715/9.7 Free float/Foreign ownership (%) 31.0/8.6
What’s Changed
Target Price ⚊
Rating/Risk Rating ⚊
INVESTMENT METRICS
Black diamond: Value at core
We analysed Coal India’s FY20 annual report. Three points stand out: i) Larger subsidiaries outscore on profitability, productivity and technological absorption. ii) Development of evacuation infrastructure to handle 1bn tonnes of coal by FY24 is underway. iii) Working capital unlocking might release cash in the near to medium term.
Meanwhile, contingent liabilities, legacy issues at ECL and BCCL, and diversification into unrelated fields are key overhangs. Furthermore, potential wage escalation may keep earnings growth muted. That said, an undemanding valuation and attractive dividend yield are formidable anchors. Retain ‘BUY’ with a TP of INR165 (7.2x FY22E EPS).
FINANCIALS (INR mn)
Year to March FY20A FY21E FY22E FY23E
Revenue 9,60,803 8,58,634 9,20,232 10,21,944
EBITDA 2,19,209 1,43,395 1,78,838 1,85,597
Adjusted profit 1,67,142 1,07,066 1,35,483 1,33,043
Diluted EPS (INR) 27.1 17.4 22.0 21.6
EPS growth (%) 23.3 (35.9) 26.5 (1.8)
RoAE (%) 57.0 31.7 35.1 29.8
P/E (x) 4.7 7.3 5.8 5.9
EV/EBITDA (x) 2.6 3.8 2.6 2.1
Dividend yield (%) 9.5 9.5 9.5 9.5
PRICE PERFORMANCE
Larger subsidiaries remain key
We find that SECL, MCL and NCL continue to be key to CIL’s performance, accounting
for 66% of production and 76% of PBT. The company’s performance slipped in FY20,
mainly due to non-execution of key contracts at MCL and weather-related
disruptions at SECL. FY21 to date, MCL and NCL have fared better than other
subsidiaries. Besides, these two subsidiaries outclass peers on both profitability and
productivity. Hence, we expect MCL and NCL to provide a leg-up to CIL’s FY21
financial performance.
Evacuation infrastructure to complement production ramp-up
We are upbeat about CIL’s focus on developing evacuation infrastructure; it is
imperative to meet the FY24 production target of 1bn tonnes. While seven railway
lines are crucial, we would also emphasise the importance of 35 First Mile
Connectivity (FMC) projects—they would not only reduce reliance on road transport,
but also improve mechanisation and reduce the carbon footprint.
Execution of evacuation infrastructure projects is taking place mostly near MCL’s and
SECL’s large mines, wherein evacuation is a constraint. In our view, this
infrastructure will complement the 52 capacity enhancement projects currently
underway.
Explore:
Outlook and valuation: Attractive dividend play
In our view, evacuation infrastructure and production capacity enhancement
provide long-term comfort on CIL’s earnings growth. Furthermore, we do not believe
merchant mines would affect CIL’s market share materially. In the near term though,
contingent liabilities—particularly relating to income tax—and environmental issues
remain the key overhangs. We also do not view diversification into urea production
as prudent capital allocation, and remain circumspect of its benefits.
That said, there’s value beneath the surface: i) an undemanding valuation at 5.8x
FY22E EPS that implies deep discount to CIL’s own trading average and that of peers’;
and ii) a mouth-watering dividend yield: 12% at the CMP. The sustainability of yield
is least of concerns as CIL should continue to generate sufficient cash even after
meeting its capex needs. Maintain ‘BUY/SO’ with a TP of INR165 at 7.2x FY22E EPS.
-40
-15
10
35
60
Sales Growth(%)
EPS Growth(%)
RoE(%)
PE(x)
Metals & Mining COAL IN Equity
25,000
28,400
31,800
35,200
38,600
42,000
100
120
140
160
180
200
Oct-19 Jan-20 Apr-20 Jul-20
COAL IN Equity Sensex
India Equity Research Metals & Mining October 1, 2020
COAL INDIA ANNUAL REPORT INSIGHTS
Amit Dixit Meera Midha +91 (22) 6620 3160 +91 (22) 4088 5804 AmitA.Dixit@edelweissfin.com Meera.Midha@edelweissfin.
com
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COAL INDIA
Edelweiss Securities Limited
2 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset
Financial Statements
Income Statement (INR mn) Year to March FY20A FY21E FY22E FY23E
Total operating income 9,60,803 8,58,634 9,20,232 10,21,944
Raw Material Cost 60,836 52,834 68,398 71,817
Employee costs 3,93,841 3,89,372 3,87,425 4,57,162
Other expenses 1,01,473 86,667 97,205 1,02,065
EBITDA 2,19,209 1,43,395 1,78,838 1,85,597
Depreciation 34,508 39,769 46,245 53,800
Less: Interest expense 5,029 4,092 4,092 4,092
Add: Other income 61,054 45,150 54,584 52,083
Profit before tax 2,40,713 1,44,684 1,83,086 1,79,788
Prov for tax 73,710 37,618 47,602 46,745
Less: Other adj 0 0 0 0
Reported profit 1,67,142 1,07,066 1,35,483 1,33,043
Less: Excp.item (net) 0 0 0 0
Adjusted profit 1,67,142 1,07,066 1,35,483 1,33,043
Diluted shares o/s 6,163 6,163 6,163 6,163
Adjusted diluted EPS 27.1 17.4 22.0 21.6
DPS (INR) 12.0 12.0 12.0 12.0
Tax rate (%) 30.6 26.0 26.0 26.0
Important Ratios (%) Year to March FY20A FY21E FY22E FY23E
EBITDA (INR/t) 472.1 341.9 391.8 388.2
Staff Costs (% of sales) 41.0 45.3 42.1 44.7
Output (t/worker) 2,192.0 2,145.9 2,416.9 2,671.3
EBITDA margin (%) 22.8 16.7 19.4 18.2
Net profit margin (%) 17.4 12.5 14.7 13.0
Revenue growth (% YoY) (3.5) (10.6) 7.2 11.1
EBITDA growth (% YoY) 3.8 (34.6) 24.7 3.8
Adj. profit growth (%) 23.3 (35.9) 26.5 (1.8)
Assumptions (%) Year to March FY20A FY21E FY22E FY23E
GDP (YoY %) 4.8 (6.0) 7.0 6.0
Repo rate (%) 4.4 3.5 3.5 4.0
USD/INR (average) 70.7 75.0 73.0 72.0
Production (mT) 602.2 560.0 599.2 629.2
Sales (mT) 581.8 546.9 585.1 614.4
FSA Volumes (mT) 501.0 452.4 500.0 521.9
e-Auction (mT) 65.4 82.6 70.1 74.4
FSA Realisation (INR/t) 1,538.0 1,472.9 1,504.3 1,590.4
e-Auction Premium (%) 41.6 14.1 23.2 23.2
Valuation Metrics Year to March FY20A FY21E FY22E FY23E
Diluted P/E (x) 4.7 7.3 5.8 5.9
Price/BV (x) 2.4 2.2 1.9 1.6
EV/EBITDA (x) 2.6 3.8 2.6 2.1
Dividend yield (%) 9.5 9.5 9.5 9.5
Source: Company and Edelweiss estimates
Balance Sheet (INR mn) Year to March FY20A FY21E FY22E FY23E
Share capital 61,627 61,627 61,627 61,627
Reserves 2,59,942 2,93,055 3,54,586 4,13,676
Shareholders funds 3,21,569 3,54,683 4,16,213 4,75,303
Minority interest 3,941 3,941 3,941 3,941
Borrowings 64,260 64,260 64,260 64,260
Trade payables 1,01,076 87,598 1,05,216 1,10,477
Other liabs & prov 3,06,125 3,06,125 3,06,125 3,06,125
Total liabilities 14,67,105 15,30,333 16,59,885 17,77,159
Net block 3,67,455 3,97,686 4,61,441 5,07,641
Intangible assets 953 953 953 953
Capital WIP 82,711 82,711 82,711 82,711
Total fixed assets 4,51,119 4,81,350 5,45,105 5,91,305
Non current inv 18,732 18,732 18,732 18,732
Cash/cash equivalent 2,85,465 3,16,534 3,92,835 4,75,215
Sundry debtors 1,44,082 1,46,767 1,38,665 1,25,993
Loans & advances 11,412 11,412 11,412 11,412
Other assets 4,00,548 3,99,790 3,97,388 3,98,755
Total assets 14,67,105 15,30,333 16,59,885 17,77,159
Free Cash Flow (INR mn) Year to March FY20A FY21E FY22E FY23E
Reported profit 1,67,142 1,07,066 1,35,483 1,33,043
Add: Depreciation 34,508 39,769 46,245 53,800
Interest (net of tax) 5,029 4,092 4,092 4,092
Others (2,40,799) 46,308 1,50,157 1,28,709
Less: Changes in WC 1,95,047 15,405 (28,122) (16,566)
Operating cash flow 41,465 1,75,022 2,60,253 2,56,333
Less: Capex 56,445 70,000 1,10,000 1,00,000
Free cash flow (14,980) 1,05,022 1,50,253 1,56,333
Key Ratios Year to March FY20A FY21E FY22E FY23E
RoE (%) 57.0 31.7 35.1 29.8
RoCE (%) 55.8 26.5 30.1 26.4
Inventory days 366 455 343 324
Receivable days 38 62 57 47
Payable days 586 652 514 548
Working cap (% sales) 12.0 15.3 11.2 8.5
Gross debt/equity (x) 0.2 0.2 0.2 0.1
Net debt/equity (x) (0.7) (0.7) (0.8) (0.9)
Interest coverage (x) 0 0 0 0
Valuation Drivers Year to March FY20A FY21E FY22E FY23E
EPS growth (%) 23.3 (35.9) 26.5 (1.8)
RoE (%) 57.0 31.7 35.1 29.8
EBITDA growth (%) 3.8 (34.6) 24.7 3.8
Payout ratio (%) 44.2 69.1 54.6 55.6
Edelweiss Securities Limited
COAL INDIA
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 3
Coal India FY20 annual report: 13 key points Our analysis is based on the review of annual reports and financial statements of all the
eight subsidiaries except NECL.
In our view, CIL is focusing on achieving 1bn tonnes of production target by FY24 through
the right combination of enhancing production and building railway infrastructure.
Larger subsidiaries such as SECL, MCL and NCL are expected to play a pivotal role.
On the cash-accretion front, we believe the worst is over for the company and that there
might be a working capital release from receivables and inventory. This would keep
dividend yield sustainable even after considering capex needs.
However, on the other side, we see an increase in contingent liabilities because of
income tax and environmental clearances at MCL and SECL, respectively.
#1. Productivity and profitability: MCL and NCL ahead of the rest
Akin to FY19, all the subsidiaries were profitable in FY20. Larger subsidiaries NCL, MCL
and SECL outdo others on productivity. Productivity of smaller subsidiaries is lower than
average.
That said, on the profitability front, smaller subsidiaries such as ECL and BCCL turned in
a better performance than in FY19. However, SECL’s profitability declined the most due
to a lower premium for non-power coal volumes and a dip in sales volume. On the other
hand, MCL and NCL were steady in terms of both profitability and productivity.
Year to FY21E, volumes have grown well at both MCL and NCL. This should improve CIL’s
overall profitability.
FY20: NCL and MCL continue to excel on profitability and productivity
Source: Company, Edelweiss Research
ECLBCCL
CCL
NCL
WCL
SECLMCL
0
1,900
3,800
5,700
7,600
9,500
-50 110 270 430 590 750
(To
nn
age
per
per
son
)
(PBT/t)
COAL INDIA
Edelweiss Securities Limited
4 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset
FY19: Productivity and profitability matrix
Source: Company, Edelweiss Research
#2. Working capital stretched in FY20 due to receivables
Despite generating INR284bn from operations (pre-working capital adjustments), cash
and balances decreased by INR2.6bn in FY20. Furthermore, debt rose by INR22.7bn. Cash
generation was severely impacted by a spurt in receivables, up 162% (by INR89bn) from
last year. The increase in receivables is attributable to delayed payments by state owned
discoms. Besides, current assets increased owing to advance payment of tax amounting
to INR47bn in Q4FY20.
Working capital stretched in FY20, receivables rise
Source: Company, Edelweiss Research
We observe receivables increased across subsidiaries. In case of SECL, BCCL and WCL, the
increase was ~3x on average. State discoms were not able to clear their dues, particularly
in Q4FY20. We also note that the bulk of the increase in receivable pertains to the
unsecured category. This might make additional receivables more prone to risk. On the
other hand, the additional receivables are recent (<30 days). Hence, the risk of a write-
off is lower. In our view, the government’s recent initiatives might reduce the receivables
in H2FY21.
ECLBCCL
CCL
NCL
WCL
SECL
MCL
0
1,600
3,200
4,800
6,400
8,000
0 160 320 480 640 800
(To
nn
age
per
per
son
)
(PBT/t)
-50
20
90
160
230
300
Cas
hfl
ow
fro
mo
per
atio
ns
Rec
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s
Inve
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Cap
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Div
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Oth
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Ch
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in c
ash
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ank
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ance
(IN
R b
n)
Edelweiss Securities Limited
COAL INDIA
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 5
Receivables by subsidiary
(INR mn) FY20 FY19
% growth Gross Net of Provisions Gross Net of Provisions
ECL 36,996 33,165 19,290 16,219 104.5
BCCL 31,544 24,147 13,938 6,137 293.5
CCL 27,755 24,921 13,182 10,951 127.6
NCL 18,556 18,502 9,602 9,545 93.8
WCL 13,769 13,499 3,876 3,602 274.8
SECL 20,396 16,538 6,806 3,877 326.6
MCL 13,754 13,231 5,360 4,652 184.4
NEC/CIL 192 80 151 3 NM
Total 1,62,961 1,44,082 72,203 54,986 162.0
Source: Company, Edelweiss Research
Coal inventory too rose significantly: up from 54mt at end-FY19 to 74mt at end-FY20.
The inventory of stores and spares on the other hand was slightly lower. Almost 84%
of the coal inventory increase was at SECL and WCL. In case of SECL, while production
picked up in Q4FY20, the offtake stayed subdued. In case of WCL, refusal of
MAHAGENCO to take coal from cost-plus sources and less lifting of coal by MPPGCL
resulted in a subdued offtake. As a result, coal inventory at WCL stood at 14.3mt at
the end of FY20 compared with 9.2mt a year ago.
CIL inventory split
(INR mn) FY20 FY19 % growth
Stores & Spares 11,838 12,092 -2.1
Coal 52,005 41,382 25.7
Others 2,347 2,365 -0.8
CIL 66,189 55,839 18.5
Source: Company, Edelweiss Research
Coal inventory by subsidiary
FY20 FY19 % growth
NCL 2,762 2,439 13.3
ECL 3,229 2,384 35.4
SECL 8,067 4,697 71.8
WCL 13,421 7,912 69.6
CCL 11,785 10,673 10.4
BCCL 6,305 7,098 -11.2
MCL 7,046 4,255 65.6
CIL 52,005 41,382 25.7
Source: Company, Edelweiss Research
COAL INDIA
Edelweiss Securities Limited
6 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset
Stores and spares by subsidiary
FY20 FY19 % growth
NCL 3,917 4,288 -8.7
ECL 1,664 1,702 -2.3
SECL 2,817 2,929 -3.9
WCL 725 708 2.4
CCL 1,669 1,442 15.7
BCCL 631 581 8.7
MCL 698 589 18.6
CIL 11,838 12,092 -2.1
Source: Company, Edelweiss Research
#3. SECL and MCL: Critical to meeting near-term targets
CIL has a production/offtake target of 710mt for FY21E. However, management,
during the Q1FY21 earnings conference call, clarified that the target has been
revised down to 660mt in the wake of covid-19. The revised target hinges mainly on
additional 25-30mt each from SECL and MCL.
We note that the FY21E target has been kept similar to FY20 with subsidiary-wise
allocation in accordance with their performance in FY20. For instance, the target for
NCL, the only subsidiary to have achieved its FY20 target, has been revised up to
113mt. In case of SECL and MCL, the largest subsidiaries that fell short of meeting
their targets by about 17% each, FY21 targets are broadly unchanged.
Overall offtake suffers mainly due to underperformance of SECL and MCL
Company FY21 % YoY
growth
FY20 % YoY
growth
FY19
AAP Target AAP Target Achieved % Achieved AAP Target Achieved % Achieved
ECL 52 5.4 54 49 92.2 -2.2 47 50 107.8
BCCL 29 0.8 36 29 79.9 -13.0 38 33 87.0
CCL 74 9.9 77 67 87.4 -1.6 69 68 99.6
NCL 113 5.2 106 107 101.1 5.8 95 102 106.9
WCL 60 14.1 56 53 93.9 -5.4 50 56 111.8
SECL 172 21.2 171 142 83.2 -9.0 160 156 97.8
MCL 160 19.4 160 134 83.8 -5.8 152 142 93.9
NEC 1 1 74.9 -25.5 1 1 89.8
CIL 660 13.4 660 582 88.2 -4.3 610 608 99.7
Source: Company, Edelweiss Research
SECL underperformed on account of: i) delay in positioning of equipment in Q1FY20,
which hurt productivity; ii) flooding in the Dipka mine (35mtpa); and iii) contract
management issues. In H2FY20, however, coal production/OB removal gained
momentum and contained the production dip. In fact, the company achieved peak
coal production on 27 March by crossing 1mt in a single day. Furthermore, the
efforts to start new mines and evacuation infrastructure yielded result as two open-
cast mines at Bijari (2mtpa) and Jagannathpur (3mtpa) were operationalised.
In case of MCL, coal production was just 87.7% of the AAP target while Overburden
removal was 77.8% of the AAP target. The major reasons for the shortfall were: i)
land constraints at various mines: Bhubaneswari, Lakhanpur, Jagannath, Hingula,
Belpahar, Kulda, etc; ii) delay in award of OBR contracts at the Bharatpur, Jagannath
and Lajkura mines; and iii) sporadic bandhs in Q2FY20 and flash rains and
thunderstorms.
Edelweiss Securities Limited
COAL INDIA
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 7
We understand that land constraint issues were resolved in H2FY20. MCL delivered
record coal despatch (52.14mt) and OBR removal (62.7m3) in the last four months
of FY20. So far in FY21, MCL has outperformed other subsidiaries, recording
production growth of 6% compared with a dip of 7% for CIL as a whole.
NCL was the only subsidiary to meet its production target; however, it could not
achieve the overburden removal target of 362m3 owing to the failure of OBR
subcontractors to achieve the desired level of excavation at the Amlohri, Bina and
Dudhichua projects.
OBR ratio remained stable in FY20
Company FY20 FY19 OBR ratio (m3/t)
Production (mt) OB (m3) Production OB (m3) FY20 FY19
ECL 50 140 50 126 2.8 2.5
BCCL 28 83 31 103 3.0 3.3
CCL 67 103 69 100 1.5 1.5
NCL 108 323 102 318 3.0 3.1
WCL 58 211 53 192 3.7 3.6
SECL 151 165 157 183 1.1 1.2
MCL 140 125 144 130 0.9 0.9
NEC 1 5 1 9 9.1 10.8
CIL 602 1,154 607 1,162 1.9 1.9
Source: Company, Edelweiss Research
By sector, low despatches to the power sector is the single most important factor for the
shortfall. Despatch to the power sector was just 88% of target and 5% lower than FY19
owing to the slowdown in industrial activity in Q2FY20, high stocks at power plants and
lockdown in the last fortnight of March-20.
Power sector: Key reason for the miss in despatches
Year FY20 YoY
growth
FY19 FY18 YoY Growth
Sector AAP Target Diepatch (%) AAP Target Diepatch (%) Actual Absolute (%)
Power (Utilities)* 530.0 465.7 87.9 (5.3) 489.0 491.5 100.5 454.2 37.3 8.2
Steel** 4.1 2.2 54.2 7.7 3.7 2.1 56.1 3.1 (1.1) (33.9)
Cement 5.0 5.7 113.3 23.0 6.3 4.6 74.1 4.8 (0.2) (4.0)
Fertilizer 2.7 1.8 66.0 (1.5) 2.6 1.8 68.1 1.9 (0.1) (4.9)
Others 125.9 107.1 85.0 (1.1) 106.8 108.3 101.4 117.4 (9.1) (7.8)
Despatch 667.8 582.5 87.2 (4.2) 608.4 608.3 100.0 581.5 26.8 4.6
Source: Company, Edelweiss Research
Note: * Power house despatches in 2018–19 and 2017–18 include despatches under special forward e-auction to power.
** Despatch of washed coking coal and raw coking coal for direct feed, blendable coal to steel plants and to external washeries.
#4. FY20 revenue dip: Power volume/e-auction premium
The decline in CIL’s FY20 revenue can be attributed to lower volumes to the power sector
as well as a reduction in the premium obtained from the non-power sector. Volume to
the power sector dipped 5% to 466mt. Similarly, non-power realisation dropped 10%.
However, this was partially offset by higher realisation from Power customers owing to
higher supply through linkages and improvement in grades.
COAL INDIA
Edelweiss Securities Limited
8 Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset
FY20 revenue dip: Largely attributable to lower power volume/e-auction premium
Source: Company, Edelweiss Research
All the subsidiaries (except WCL) reported a sharp decline in realisation premium of
non-power over power customers. It was the steepest in case of ECL and BCCL.
However, for both, the dip in premium was accentuated by the uptick in power
realisation and a simultaneous decline in non-power realisation. Surprisingly, SECL
was the only subsidiary whose power realisation was lower than last year’s.
FY20: Volume and realisation by subsidiary
FY20 Revenue (INR mn) Volume (mt) Realisation (INR/t)
% premium Power Non-Power Power Non-Power Power Non-Power
ECL 1,10,089 18,149 45 4 2,428 4,558 87.7
BCCL 69,842 19,834 24 5 2,956 3,866 30.8
CCL 82,107 34,320 53 15 1,545 2,290 48.2
NCL 1,31,257 24,309 93 15 1,415 1,655 16.9
WCL 61,722 29,670 43 10 1,435 3,097 115.8
SECL 1,07,696 60,693 115 27 939 2,227 137.2
MCL 87,915 53,705 93 41 949 1,299 37.0
CIL 6,50,627 2,40,679 465 117 1,399 2,058 47.1
Source: Company, Edelweiss Research
FY19: Volume and realisation by subsidiary
FY19 Revenue (INR mn) Volume (mt) Realisation (INR/t)
% premium Power Non-Power Power Non-Power Power Non-Power
ECL 1,06,527 22,617 47 4 2,272 6,423 182.7
BCCL 67,648 26,129 27 6 2,483 4,482 80.5
CCL 75,392 37,348 52 16 1,439 2,291 59.2
NCL 1,27,157 21,899 89 13 1,430 1,728 20.8
WCL 60,818 29,405 45 10 1,349 2,809 108.2
SECL 1,28,429 68,812 128 28 1,002 2,467 146.2
MCL 91,853 61,395 103 40 896 1,543 72.3
CIL 6,57,825 2,67,604 491 116 1,339 2,298 71.6
Source: Company, Edelweiss Research
870
880
890
900
910
920
930
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Edelweiss Securities Limited
COAL INDIA
Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL <GO>, Thomson FirstCall, Reuters and Factset 9
#5. Larger subsidaries: Critical to achieving 1bn-tonne production
In FY20, only two new projects went on stream. However, the contribution from
these new projects was impacted by late commencement of the Jagannathpur OCP
and Bijari OCP due to the delay in obtaining clearances. Against a sanctioned
capacity of 3mtpa, Jagannathpur OCP delivered just 0.1mt.
New projects started in FY20
Subsidiary Name of Projects Type Sanctioned Capacity (mtpa) Sanctioned Capital (INR mn) Production in FY20 (mt)
SECL Jagannathpur OC OC 3.0 4,595 0.1
SECL Bijari OCP OC 1.5 1,645 1.7
Total 4.5 6,240 1.7
Source: Company, Edelweiss Research
In FY20, CIL/subsidiaries board sanctioned projects aggregating 132mtpa in capacity
entailing capex of INR212bn. We expect these projects to be spread over several
years; however, they are key to execution CIL’s 1bn tonne production target by FY24.
New projects approved in FY20
S. No. Name of Project Subsidiary Date of Approval Sanctioned Capacity
(mtpa)
Sanctioned Capital (INR
mn)
A. Sanctioned by CIL in FY20
1 Parasea Belbaid Re-Org. UG ECL 22-Jul-19 2.1 8,264
2 Block-B Expn. OCP NCL 22-Jul-19 8.0 9,987
3 Rampur Batura OCP SECL 22-Jul-19 4.0 12,082
4 RPR of Bjattadih Expn. OCP WCL 11-Feb-20 2.0 5,806
5 Dinesh (MKD-III) Expn. OCP WCL 11-Feb-20 8.0 8,229
6 Kotre Basantpur Pachmo OCP CCL 11-Feb-20 5.0 8,611
7 Recast EPR Amrapali OCP CCL 11-Feb-20 25.0 49,836
8 RPR Magadh Expn. OCP CCL 11-Feb-20 51.0 69,643
9 RCE Khadla Expn. OCP NCL 11-Feb-20 10.0 7,933
Sub Total (A) 115.1 1,80,391
B. Sanctioned by Subsidiary in FY20
1 Parej East RPR OCP CCL 04-Nov-19 0.5 2,601
2 Pichri OCP CCL 03-Aug-19 1.2 3,496
3 Tetariakhar RCE OCP CCL 04-Nov-19 2.5 2,435
4 Simaria OC NCL 25-May-19 2.0 3,966
5 Gandhigram UG WCL 31-Aug-19 1.3 4,142
6 Hendegir OC CCL 03-Mar-20 4.0 4,356
7 RPR of Jarangdih PC CCL 03-Mar-20 1.5 4,144
8 Dhankasa UG WCL 03-Feb-20 1.0 2,893
9 Expn. Of New Majri UG to OC WCL 25-May-19 3.0 4,023
Sub Total (B) 17.0 32,055
Total (A + B) 132.0 2,12,446
Source: Company, Edelweiss Research
According to the revised road map for 1bn tonnes per year of coal production by FY24,
SECL is expected to account for almost 25% (254mt). The major share of production is
likely to accrue from Gevra OC (70mtpa), Kusumunda OC (50mtpa), Dipka (40mtpa),
Manikpur OC (3.5mtpa), Saraipali OC RCE (1.4mtpa) in the Korba coalfields. In the Mand
Raigarh coalfields, Baroud OC (3mtpa), Jampali OC RCE (2mtpa), Chhal OC (6mtpa) and
Bijari OC (1.5mtpa).
COAL INDIA
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There are 37 completed projects in MCL with rated capacity of 73.78mt (including
capacity of exhausted mines), out of which two with rated capacity of 1.6mt have been
exhausted. As many as 16 projects were under implementation (at end-March-20) with
rated capacity of 156.83mt. Production from these projects stood at 87.7mt in FY20.
For FY21, three MDOs are planned with total capacity of 85mtpa: Siarmal–50mtpa;
Subhadra– 25mtpa; and Balbhadra–10mtpa. Three expansion projects of 85mtpa are
also lined up, namely, Bhubneswari (40mtpa), Kaniha (30mtpa) and Balram (15mtpa).
The completion of the 52km line from Jharsuguda to Sardega will augment coal
transportation from the Basundhara area.
Similarly, in the Talcher coalfield, the Kalinga-Angul link railway line is being laid.
Completion of this stretch would enable a unidirectional movement of empty rail rakes
from the Angul side while loaded rakes will be evacuated from the Talcher side. This will
double the Talcher coalfield’s rake movement capacity.
In case of NCL, three expansion projects are going on: Jayant from 10mtpa to 20mtpa,
Dudhichua from 10mtpa to 20mtpa and Block B from 3.5mtpa to 8mtpa. Besides, the
NCL board approved one greenfield open-cast mining project, viz., Semaria OCP (2mtpa)
in May-2019. Three new/expansion open-cast projects too have been identified for
planning during FY21: Jhingurdah Bottom OCP (2mpta), Khadia Expansion from 10mtpa
to 15mtpa and Nigahi expansion OCP from 15mtpa to 25mtpa.
Two of the biggest projects (cumulative: 76mt) in FY20 have been approved for CCL. Its
target for FY24 has been pegged at 145mt, implying a CAGR of 21% (FY20-24E), the
highest among subsidiaries. NCL is the other subsidiary in focus with three projects
totalling 20mtpa.
#6. Evacuation infrastructure: Focus on railways
Coal evacuation is critical for increasing CIL’s production from 608mt in FY20 to 1bn
tonnes in FY24. A major increase in production is expected to come from SECL (Korba
Coalfields, Mand-Raigarh Coalfields), MCL (IB Valley, Talcher) and CCL (North Karanpura).
As of now, close to 67% of the total coal transportation takes place through green
channels- ex-road. In case of ECL and NCL, wherein rail transportation is quite developed,
the bulk of transportation of coal takes place by the rail or merry go round (MGR) route.
However, WCL, SECL and MCL still lag behind, which pulls CIL’s overall average down.
The bulk of production growth through FY24 is expected to come from these subsidiaries;
hence it is imperative to augment their railway evacuation infrastructure.
FY20: Modes of coal transportation
(In mt) Rail Road MGR Belt pipe conveyor Others Total Green transport
ECL 33 3 14 0 0 49 95%
CCL 36 23 0 0 9 67 53%
NCL 32 21 51 3 107 80%
WCL 33 17 0 2 53 63%
SECL 50 60 24 6 2 142 57%
MCL 77 43 12 2 134 67%
Source: Company, Edelweiss Research
Edelweiss Securities Limited
COAL INDIA
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FY19: Modes of coal transportation
(In mt) Rail Road MGR Belt pipe conveyor Others Total Green transport
ECL 34 2 14 0 0 50 95%
CCL 31 29 0 0 9 68 45%
NCL 30 21 47 4 102 80%
WCL 35 18 0 2 55 64%
SECL 49 71 27 7 2 156 53%
MCL 87 43 11 2 143 69%
Source: Company, Edelweiss Research
CIL has identified seven critical railway projects for evacuation of coal, out of which three
are funded by CIL on a deposit basis and the remaining four are funded via JVs/SPVs. The
status of these projects follows.
1. Tori-Shivpur New BG single line (43.7km): Commissioned
The single rail line from Tori up to Balumath (19.3km length) was inaugurated for
coal traffic movement in March 2018. Subsequently, coal movement also started
from Bukru and Phulbasia sidings on this rail line. Civil works related to a single rail
line from Tori up to Shivpur have been completed and doubling of rail line from Tori
to Shivpur is over along with overhead electrification works.
Other ancillary works are in progress by Eastern Central Railway. The Biratoli-
Mahuamilan surface rail line has been done and work on the Tori-Biratoli rail line
connectivity is in progress. Railways has incurred a total of INR22.7bn on the Tori-
Shivpur new BG rail line network, including connectivity work of Tori-Biratoli and
Biratoli-Mahuamilan rail lines.
Tori-Shivpur line
Source: Company, Edelweiss Research
COAL INDIA
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2. Doubling of Jharsuguda-Barapali-Sardega rail line
This project consists of doubling of the Jharsuguda-Sardega rail line of 52.4km,
double-leg rail flyover at Jharsugda and Barpali loop with seven concentric rail
lines and seven RLS in these lines of total capacity 70mtpa. The estimated cost
of the entire project is INR29bn.
Jharsuguda-Barapali-Sardega line
Source: Company, Edelweiss Research
3. East Rail Corridor in state of Chhattisgarh
During FY20, the first 45km from Kharsia to Korichhapar (single line) of Phase-I
has become operational for Goods Traffic in October-2019. Signaling & telecom
work in this section is in advanced stage of completion. SCRL has started
receiving its share of revenue from SECR as per the provisions of concession
agreement with them.
As on 31 March 2020, the total expenditure on the project (Phase-1) is
INR21.8bn, out of the total project cost of INR30.6bn. The remaining part of the
mainline between Korichhapar to Dharamjaigarh and the first block section of
the spur line from Gharghora to Bhalumuda is also at an advanced stage of
completion. The execution of second block section from Bhalumuda to Donga-
Mahua has been put on hold, pending decision of alignment from the
Government of Chhattisgarh.
The Detailed Project Report (DPR) for Phase-II of the Project from
Dharamjaigarh to Korba for about 61.53km plus 9.073km flyover at the Urga
single line, plus 6km for a Y connection that is 135.30km long has been approved
by the CERL, SECL and CIL boards at a total project cost of INR16.8bn
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COAL INDIA
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4. East West Rail Corridor in state of Chhattisgarh
Chhattisgarh East West Rail Ltd (CEWRL), a JV between SECL, IRCON and CSIDCL
was incorporated in March-2013, with a shareholding of 64%, 26% and 10%,
respectively, for developing the East-West Rail Corridor (Gevra Road-Pendra
Road new line project of 135.3km) under the PPP policy of Railways. The
estimated cost of the project is INR49.7bn and it is expected to be completed
by March-23. East-West Rail corridor has been accorded the status of a “Special
Railway Project” by the Ministry of Railways. This rail corridor will facilitate coal
transport from Gevra coalfields of SECL as well as to cater to passenger services.
This corridor will take care of enhanced coal production at the Korba Coalfields
from 100mt at present to 150mt over the next four years. Korba Coalfields has
the biggest mine of Asia, viz., Gevra. Coal production at Gevra is expected to go
up from the current level of 41mt to 70mt. Coal production from Kusmunda will
also increase from 40mt to 50mt. Currently, coal traffic from the Korba area is
going from Korba and merging at the Champa station in Main Line of Howrah-
Mumbai trunk route of SECR. Champa to Bilaspur sector is quite congested with
more than 100 trains running each way. An alternative route from Korba to
Pendra is planned to avoid congested section of SECR for taking coal from Korba
to North-West India. Also, the distance will reduce by 54km.
Land acquisition and forest clearances have been completed for the main line.
Promotors have infused equity to the tune of INR5.04bn.
Rail corridors by CEWRL and CERL
Source: Company, Edelweiss Research
5. Angul-Balram rail link
MCL has partnered with Indian Railways and the Government of Odisha to form
a JV, i.e. MCRL. MCRL has taken up the work of the Angul-Balram rail link in
Phase-1 as part of Inner Corridor (14.22km). The projects identified for taking
up through MCRL are:
COAL INDIA
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Phase-1 (a): Angul-Balram Link (Length 13km)
Phase- 1 (b): Balram-Jarapada connectivity including Putugadia-Tentuloi
Link- 55km
Phase –II: Jarapada-Budhapank via. Tentuloi (Outer Corridor)- 136km
6. Shivpur Kathautia Railway line
This is a 47.7km long railway line being proposed under the JV model in North
Karanpura Coalfield of ECL. Land acquisition is in progess.
Shivpur-Kathautia Line
Source: Company, Edelweiss Research
7. Rail connectivity of Lingaraj SILO with Deulbeda siding
Construction of the new coal corridor at the Talcher coalfield of 41.98km is in
the final stage. Of the six parts, only the Lingaraj part (Phase I and II- 6.21km) is
pending. The Lingaraj section is also 72% complete with rail connectivity of
Lingaraj Silo with Deulbeda siding is pending. The new coal corridor is expected
to be commissioned in March-21. The cost has been revised up from INR1.7bn
to INR2.4bn.
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COAL INDIA
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First-mile connectivity (FMC)
FMC is the system of coal transportation aimed to replace the existing road transport of
coal from pitheads to despatch points with seamless mechanised transportation systems
such as conveyor belts to decrease the transportation time and dust pollution. It will have
multiple added advantages such as easing the load on road network, saving in diesel cost
and reduction of the loading cycle time of rakes/idling of rakes.
CIL has identified 35 FMC projects in mines having capacity 4mtpa and above. All the
subsidiaries have in-principle approved their respective projects in their respective
Boards. Out of 35 projects, tenders have been floated for 12 projects. The rest 23 projects
are under different stages of formulation. Out of 12 floated tenders, work has been
awarded in respect of 8 projects (SECL), which are under construction for 117mtpa
capacity.
SECL has announced eight projects under the first phase of the initiative at an estimated
cost of INR31.5bn. SECL will set up coal handling points (HP) with Silo having rapid loading
systems, which will have benefits like crushing, sizing of coal, quicker and better quality
coal loading, not to mention the advantage of precise pre-weighted quantity of coal
being loaded.
Construction of Phase-I of CHP consisting of 2x4x100t truck receiving hoppers and 20kt
capacity overhead RCC bunker at Kusmunda OC was completed and commissioned in
February-20. Evacuation of coal is in operation through Belts 1 and 2 of Chhattisgarh
State Power Generation Company Limited (CSPGCL). Construction of Phase II CHP
consisting of 4 nos. silo with rapid loading system and Kusmunda OC is in progress.
SECL: First-mile connectivity projects
FMC projects (INR mn)
Kusmunda Phase II CHP Silo (40mtpa) 2,628
Kusmunda Phase II 5,000
Manikpur CHP Silo (5mtpa) 1,568
Gevra RLS (20mtpa) 2,024
Gevra Silo No. 5 & 6 (30mtpa) 7,025
Dipka Mechanised siding 2,865
Chhal OC 3,282
Baroud CHP with Silo 7,090
Total 31,481
Source: Company, Edelweiss Research
#7. Contingent liabilities rise, particularly relating to income tax
FY20 marks the biggest jump in contingent liabilities related to income tax (central
government) and environmental clearances (state government). The increase in
contingent liabilities related to income tax have risen primarily at MCL while the increase
in contingent liabilities related to mining beyond environmental clearance limits have
risen at SECL.
Curiously, the contingent liability pertaining to SECL on environmental grounds has been
shown only in consolidated accounts of Coal India and not disclosed in the subsidiary
account.
COAL INDIA
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Contingent liabilities
(In INR mn) FY20 FY19
Central Government
Income Tax 2,46,979 1,83,479
Central Excise 47,630 46,105
Clean Energy Cess 3,214 3,214
Central Sales Tax 12,454 11,870
Service Tax 7,778 9,277
Others 7 5
Sub-total 3,18,061 2,53,950
State Government and Local Authorities
Royalty 29,558 25,226
Environmental Clearance 4,67,579 4,47,146
Sales Tax/VAT 29,599 28,692
Entry Tax 6,005 5,191
Electricity Duty 1,215 1,005
MADA 3,906 3,439
Others 19,681 19,533
Sub-total 5,57,542 5,30,232
Central Public Sector Enterprises
Suit against the company under litigation 108 431
Others 490 490
Sub-total 598 921
Others
Miscellaneous - Land & Others 29,881 30,046
Employee Related 9,164 10,379
Sub-total 39,045 40,424
Grand total 9,15,246 8,25,527
Source: Company, Edelweiss Research
Income tax liability by subsidiary
Income tax (INR mn) FY20 FY19
ECL 13,206 10,486
BCCL 8,811 7,996
CCL 8,090 6,001
WCL 807 523
SECL 1,15,502 1,05,958
MCL 62,501 22,076
CIL 2,46,979 1,83,479
Source: Company, Edelweiss Research
In FY20, MCL’s management filed revision applications against the claim of INR112bn as
compensation for production of coal beyond the environmental clearance limit from the
Office of Deputy Director Mines. As a result, the Revision Authority, Ministry of Coal set
aside the claim for INR83bn. Hence, the contingent liability has been reduced by an
equivalent amount.
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COAL INDIA
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In case of SECL, penalty of INR102bn in respect of 16 mines for illegal mining has been
imposed as per the order of Supreme Court by the state government. This penalty has
been considered in the consolidated accounts as contingent liability as appeals by the
company before the competent authority are under process. In subsidiary accounts, SECL
has not recognised this as a contingent liability.
Liabilities relating to Environmental Clearance by subsidiary
Environmental clearance (INR mn) FY20 FY19
ECL 21,781 21,781
BCCL 1,73,445 1,73,445
CCL 1,35,685 1,33,894
WCL - -
SECL 1,01,292 -
MCL 29,150 1,11,618
CIL 4,67,579 4,47,146
Source: Company, Edelweiss Research
#8. Technology adoption and absorption: Larger subsidairies in focus
CIL is taking a number of technological initiatives in various fields across its operational
activities. The company is focusing on introducing mass production technology in both
underground and opencast mines, introduction of high-wall and long-wall mining
technology, man-riding system in underground mines and enhancing its IT infrastructure.
Most optimum sizes of HEMMs are being provisioned for opencast projects. Key points:
1. In underground mining, Continuous Miner (15nos.) has been introduced at 12
mines of CIL so far. Furthermore, long-wall mining has begun in Moonidih UG of
BCCL and Jhanjra UG of ECL.
2. Free Steered Vehicles for transportation of men and materials in underground
mines have been introduced in the Jhanjra UG mine of ECL.
3. Surface miners have been introduced in several opencast mines to eliminate
drilling and blasting, and facilitating selective mining.
4. 47 man-riding systems have been commissioned at 42 mines to reduce arduous
walking of miners.
5. Geovia Minex software has been introduced for efficient planning of open-cast
mines.
6. GPS/GPRS-based Vehicle Tracking System in coal transporting vehicle to prevent
theft and pilferage.
7. RFID, CCTV and Boom barrier based Weight monitoring has been introduced to
reduce theft of coal during transfer.
8. Numerical modelling software for scientific studies involving strata control.
MCL has progressively enhanced coal production through the Surface Miner technology.
Of the 139.52mt of coal mined by the open-cast method, almost 92.52% (129.09mt) was
mined through surface miner.
CCL has been lagging as far as the technology adoption is concerned. However, the
company started operations at the Churi Underground project with continuous miner
technology on 24 March, 2019. This is CCL’s first major underground project using
continuous miner technology. Besides, the company is conducting a geological study for
extraction of 6.8mt of coal by surface miner at Tetariakhar OCP of the Rajhara area.
COAL INDIA
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SECL has been at the forefront of modernisation and technology absorption. Besides, the
initiatives in underground mines discussed elsewhere in the report, the company has
adopted surface miners on a hiring basis for coal production at Gevra OC Expansion,
Dipka OC expansion, Kusmunda OC expansion, Chhai OC, Baroud OC and Mahaan II OC.
The total coal production from Surface Miners in FY20 was 95.71mt (FY19: 102.7mt).
Besides, the company has adopted high-wall mining technology at the Sharda mine
(FY20: 5.7mt). Another new project at Batura is under implementation. High-wall mining
enables extension of mine life by extracting material from thin seams or underlying coal
seams in the high wall of an opencast mine that has reached the final position due to an
uneconomic stripping ratio or surface constraints.
NCL was the largest volume handling company of CIL in FY20 (coal production: 108.05mt;
overburden removal: 323.23m3). There are ten mechanised open-cast mines being
worked by large size HEMMs. NCL deploys the largest fleet of Draglines, Surface Miner
and some of the largest size shovel-dumper combinations. Total stations and 3D laser
scanners are used for survey along with the SURPAC software. Training to dumper
operators is imparted on training simulators. Coal is despatched through a rapid wagon
loading system in SILO of the coal handling plants.
ECL has taken initiatives for technological upgradation and modernisation of existing
underground mines, however, the progress in case of open-cast mines has been
constrained. There are land constraints in introduction of mass production technology in
large scale owing to water logging on upper horizon and expansion of open-cast
operations. The company intends to introduce high-wall mining technology at Nimcha
and Sripur Colliery.
#9. Focus on enhancing efficiency of underground operations
CIL produces just 5% of its volume from underground mines. The bulk of the underground
production happens at SECL and ECL. NCL, on the other hand, does not have any
underground mine. This is one of the reasons that make NCL one of the most profitable
subsidiary. Open-cast mining leads to mechanised bulk production at competitive rates.
Furthermore, the gentle gradient of coal seams enables deployment of Draglines, which
are cost effective in operations.
In case of ECL, underground mining is necessitated by huge infrastructure built on coal-
bearing areas that hinder open-cast mining. Additionally, dense population in the area
impedes land acquisition. Despite having a wide range of coal grades, ECL’s profitability
is impacted by its legacy of small mines.
Mix of underground and opencast mines by subsidiary
Company Underground Opencast Total
FY20 FY19 FY18 FY20 FY19 FY18 FY20 FY19 FY18
ECL 9.2 9.1 8.6 41.2 41.1 35.0 50.4 50.2 43.6
BCCL 1.0 0.9 1.1 26.7 30.1 31.5 27.7 31.0 32.6
CCL 0.7 0.3 0.4 66.2 68.4 63.0 66.9 68.7 63.4
NCL - - - 108.1 101.5 93.0 108.1 101.5 93.0
WCL 4.2 4.6 5.0 53.5 48.6 41.3 57.6 53.2 46.2
SECL 14.1 14.8 14.5 136.5 142.6 130.3 150.5 157.4 144.7
MCL 0.8 0.9 1.0 139.5 143.3 142.0 140.4 144.2 143.1
NEC - - - 0.5 0.8 0.8 0.5 0.8 0.8
CIL 30.0 30.5 30.5 572.1 576.4 536.8 602.1 606.9 567.4
Source: Company, Edelweiss Research
Edelweiss Securities Limited
COAL INDIA
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SECL has introduced Continuous miner (CM) at several underground mines such as Kurja-
Sheetaldhara mine, Kapildhara mine, Pinoura UG mine, etc. Low capacity continuous
miner at the Rani Atari mine is also in operation. The total production from continuous
miner in FY20 was 0.36mt (2.5% of total underground production). Besides, the company
has taken steps for introduction of Continuous Miner at other Underground mines such
as Ketki UG, Gayatri UG, Rehar UG, Shivani UG and Rajgamar UG in the future.
ECL has also deployed LHD/SDL in 57 of its mines until FY20. As on 31 March, 2020, the
number of SDLs, LHDs and UDMs are 244, 40 and 134, respectively. Mass production
technology using Continuous miner combined with Shuttle Car (6 sets) have been
deployed at Jhanjra, Sarpi and Kumardih-B UG projects. Furthermore, eight mines of ECL
have been identified for introduction of Continuous Miner technology, which are under
process.
In WCL, work for introduction of Continuous Miner on hiring basis at Tawa II UG has been
awarded and is likely to be introduced in FY21. Besides, the proposal for introduction of
Continuous Miner in Chhatarpur UG mine is in pipeline.
Man Riding
In order to eliminate long arduous travel, fatigue and improve productivity of workers in
underground mines, various subsidiaries have installed Man Riding Systems (MRSs):
1. WCL: 17 MRSs have been installed in 16 underground mines. Two MRSs were
installed in FY20 in Chattarpur-I and Tawa-II UG. Installation of one more MRS
at the Murpar underground mine is expected to commence shortly.
2. ECL: Ten MRS have been installed so far. In the Bansra underground mine, one
MRS was installed in FY20.
3. SECL: 17 MRSs have been installed in 14 underground mines. Besides,
procurement of MRS at Dhelwadih underground mine and Katkona
underground mines 1 and 2 (second set) is in tendering approval stage while at
the Kariaha underground mine is under process of approval.
#10. FY20 capex: Merely 63% of target; likely to change
CIL missed its capex target both in FY19 and FY20. In FY20, merely 63% of the budgeted
capex was incurred. NCL disappointed the most with a 63% shortfall in capex compared
with the budget and a 57% decline over last year.
We understand from NCL’s annual report that capex was incurred primarily in heavy
earth moving machinery (HEMM) procurement and land acquisition. No other details are
provided. So, we believe the shortfall might have been due to the postponement of
certain purchases to FY21E. The HEMM procurement plan for FY21 suggests capex might
go up this year.
In case of WCL, the spend was lower owing to non-materialisation of capital expenditure
earmarked for the new coal block and the effect of covid-19 towards the final payment
of HEMM, civil works, etc. In SECL, the delay in new projects, primarily due to land
acquisition issues resulted in the capex shortfall.
COAL INDIA
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Capex: Budgeted versus Actual over the years
(INR mn) FY20
% shortfall % growth
(YoY)
FY19 FY18
Budgeted Actual Budgeted Actual Budgeted Actual
ECL 11,000 8,967 -18.5 7.7 10,900 8,325 10,500 9,600
BCCL 6,250 5,490 -12.2 34.3 7,300 4,087 6,500 9,289
CCL 8,500 6,357 -25.2 -17.1 11,000 7,667 6,500 17,023
NCL 12,350 4,589 -62.8 -57.3 11,500 10,751 10,000 6,643
WCL 10,500 5,555 -47.1 -31.3 11,500 8,087 10,500 12,370
SECL 21,000 14,966 -28.7 -4.4 20,500 15,655 19,500 19,652
MCL 17,000 15,873 -6.6 12.2 16,000 14,146 13,000 13,679
CMPDIL 550 320 -41.9 63.4 400 196 400 417
Others 12,850 580 -95.5 -86.2 5,900 4,201 8,100 4,673
CIL 1,00,000 62,697 -37.3 -14.2 95,000 73,115 85,000 93,346
Source: Company, Edelweiss Research
#11. Dragline procurement in FY21 suggests focus on OB removal
There is a decrease of 219 equipment of Shovel-Dumper system after the survey of old
equipment in FY20. Purchase orders for high capacity HEMM of INR59bn, viz., nine
shovels, 179 dumpers and 44 dozers was placed in FY20.
In FY21, CIL plans to procure HEMM worth INR70bn, viz., six draglines, 27 shovels, 19
dumpers and 11 dozers for enhanced coal production in coming years.
In our view, procurement of draglines suggests that CIL is focusing on higher overburden
removal. Among subsidiaries, we believe procurement is expected to be higher at MCL,
WCL and CCL as these subsidiaries are critical for CIL’s future growth and suffered the
maximum decline in equipment compared with FY19.
Equipment availability and utilisation
Equipment
No. of Equipment Indicated as % of CMPDI Norm
As on 1-4-2020 As on 1-4-
2019
As on 1-4-
2018
Availability Utilisation
FY20 FY19 FY18 FY20 FY19 FY18
Dragline 33 32 35 93 92 93 87 87 80
Shovel 661 680 695 95 94 93 68 70 71
Dumper 2,678 2,878 2,781 112 112 111 69 68 69
Dozer 967 955 969 103 100 99 52 52 51
Drill 652 663 675 107 106 106 49 55 53
Source: Company, Edelweiss Research
#12. KMP remuneration: Down 16% in FY20
In FY20, key management personnel (KMP) remuneration slid 16% compared with the
declines of 9.49% in median and 9.01% in average remuneration of all employees. This
was against the revenue decline of 4%. However, the decline in remuneration was mainly
due to implementation of the recommendation of 3rd PRC in case of Executives and
payment of arrears for the same in FY19 and payment of NCWA-X arrear to Non-
Executives in the prior year. Besides, the reduction in workforce by 5% owing to natural
attrition contributed to the decline.
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COAL INDIA
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KMP remuneration
Name Designation Total (INR mn) Ratio to Median Remuneration Increase in Remuneration (%)
Pramod Agrawal* CMD 0.32 0.28 -
AK Jha** ex-CMD 7.42 6.56 1.39
SN Prasad*** ex-DIR (M) 6.26 5.53 1.09
Binay Dayal DIR (T) 6.08 5.37 1.16
R.P. Srivastava DIR (P) 5.16 4.56 1.27
Sanjiv Soni# DIR (F) 4.18 3.70 -
SN Tiwari## DIR (M) 2.29 2.03 -
Sidhartha Sarkar### CFO 1.29 1.14 -
M. Vishwanathan CS 5.17 4.57 1.08
Total 38.17
Source: Company, Edelweiss Research
Note: *Mr. Pramod Agrawal, CMD, started drawing remuneration from CIL HQ w.e.f. 1.02.2020.
** Mr. A. K. Jha, ex-CMD, superannuated from CIL HQ w.e.f. 31.01.2020.
*** Mr. S N Prasad, ex-D(M) superannuated from CIL HQ w.e.f. 30.11.2019.
# Mr. Sanjiv Soni, D (F) started drawing remuneration from CIL HQ w.e.f. 01.07.2019.
## Mr. S N Tiwari, D(M) started drawing remuneration from CIL HQ w.e.f.01.12.2019.
### Mr. Sidhartha Sarkar, GM(F/IC), relinquished the post of CFO, CIL w.e.f.10.07.2019, so data only up to 30.06.2019 provided.
#13. Progress on other projects
Coal-based ammonia-urea complex at Talcher
Talcher Fertilisers Limited (TFL), a JV of CIL with RCF, GAIL and FCIL, has been entrusted
with setting up a 1.27mtpa Surface Coal Gasification based integrated fertilizer plant on
a partial Lump Sum Turnkey (LSTK) basis on the premises of FCIL’s closed fertilizer plant
at Talcher (Odisha).
Of the estimated project cost of INR133bn (D/E of 72:28), work orders worth over
INR78bn have been awarded in September-19. The TFL board and the board of promotor
companies approved coal gasification technology of M/s Air Products. All pre-project
works such as commissioning of Construction Water System, Construction of Power Line,
Land Development, etc are in full swing. LSTK contractor M/s Wuhaun Engineering has
commenced the site preparation through a local contractor.
In our view, this project might suffer delays owing to the outbreak of covid-19 and the
recent tensions in the Indo-China relations.
Setting up of natural gas-based ammonia-urea complex at Gorakhpur, Sindri, Barauni
Another JV by the name of Hindustan Urvarak & Rasayan Limited (HURL) comprising CIL,
IOCL, FCIL and HFCL is involved in setting up a natural-gas based 1.27mtpa plant on the
premises of FCIL’s closed fertilizer plants at Gorakhpur (UP) and Sindri (Jharkhand) and
that of HFCL at Barauni (Bihar). The three plants are being set up at an estimated cost of
INR220bn, which would have a D/E of 75:25.
Contracts have been awarded to successful bidders on a Lump-Sum Turn Key (LSTK)
basis. Construction works of all three projects are on track. Overall work progress is 86%
at Gorakhpur, 76% at Sindri and 75% at Barauni. Urea production is expected to
commence in 2021.
Setting up of coal-to-methanol plant at Dankuni Coal Complex (DCC)
CIL is exploring the possibilities to venture into Coals to Chemicals sector on standalone
basis by setting up a coal-to-methanol plant at the Dankuni Coal Complex. Coal sourced
COAL INDIA
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from Raniganj coalfields shall be gasified to produce syngas, which shall be consequently
converted into methanol.
M/s Project & Development India Ltd. (PDIL) prepared the Pre-Feasibility Report (PFR)
for setting up of a 0.676mtpa capacity the coal-to-methanol plant. The project is still in
an initial stage. On 20 March, 2020, a global EOI was floated seeking inputs from
interested parties for preparation of tender document for selection of contractors for
setting-up and operation of the proposed coal-to-methanol plant on build-own-operate
(BOO) basis.
MoU with GAIL
CIL has executed a memorandum of understanding (MoU) with GAIL to explore areas of
mutual co-operation for setting up of an additional coal-to-chemical plant in the vicinity
of CIL’s high-calorific value coalfields.
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Additional Data Management
Chairman Pramod Agrawal
Director (Finance) Sanjiv Soni
Director (Marketing)
S.N. Tiwary
Director (Technical)
Binay Dayal
Auditor Ray & Ray
Holdings – Top 10* % Holding % Holding
HDFC AMC 3.69 SBI MF 0.71
Reliance Capita 3.14 BlackRock Inc 0.61
ICICI AMC 1.11 ABSL AMC 0.41
GIC 1.04 Lazard 0.32
Vanguard Group 0.85 Franklin Resour 0.22
*Latest public data
Recent Company Research Date Title Price Reco
03-Aug-20 Coal India - Company Update - First sign of recovery; Company Update
165 Buy
19-Jul-20 Coal India - Cash balance: Insulation ag; Company Update
165 Buy
29-Jun-20 Coal India - Result Update Q4FY20; Value; Result Update
165 Buy
Recent Sector Research Date Name of Co./Sector Title
24-Sep-20 Metals & Mining Firm domestic prices; concerns in China; Sector Update
21-Sep-20 Metals & Mining Production cheer; Sector Update
17-Sep-20 Metals & Mining Optimism pauses for the reality check; Sector Update
Rating Interpretation
Source: Bloomberg, Edelweiss research
Daily Volume
Source: Bloomberg
Rating Distribution: Edelweiss Research Coverage
Buy Hold Reduce Total
Rating Distribution* 161 64 14 239
>50bn >10bn and <50bn <10bn Total
Market Cap (INR) 176 59 12 247
* stocks under review
Rating Rationale
Rating Expected absolute returns over 12 months
Buy: >15%
Hold: >15% and <-5%
Reduce: <-5%
TP325
TP325
TP235
TP275
TP303
TP243
100
145
190
235
280
325
Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20
(IN
R)
COAL IN Equity Buy Hold Reduce0
16
32
48
64
80
Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20
(Mn
)
COAL INDIA
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