India Equity Research Metals & Mining October 1, 2020
COAL INDIA
ANNUAL REPORT INSIGHTS
KEY DATA Rating BUY Black diamond: Value at core Sector relative Price (INR) 116 12 month price target (INR) 165 We analysed Coal India’s FY20 annual report. Three points stand out: Market cap (INR bn/USD bn) 715/9.7 i) Larger subsidiaries outscore on profitability, productivity and Free float/Foreign ownership (%) 31.0/8.6 What’s Changed technological absorption. ii) Development of evacuation infrastructure Target Price ⚊ to handle 1bn tonnes of coal by FY24 is underway. iii) Working capital Rating/Risk Rating ⚊ unlocking might release cash in the near to medium term. INVESTMENT METRICS 60 Meanwhile, contingent liabilities, legacy issues at ECL and BCCL, and 35 diversification into unrelated fields are key overhangs. Furthermore, 10 -15 potential wage escalation may keep earnings growth muted. That said, -40 an undemanding valuation and attractive dividend yield are Sales Growth EPS Growth RoE PE (%) (%) (%) (x) formidable anchors. Retain ‘BUY’ with a TP of INR165 (7.2x FY22E EPS).
Metals & Mining COAL IN Equity
FINANCIALS (INR mn) Larger subsidiaries remain key Year to March FY20A FY21E FY22E FY23E We find that SECL, MCL and NCL continue to be key to CIL’s performance, accounting Revenue 9,60,803 8,58,634 9,20,232 10,21,944 for 66% of production and 76% of PBT. The company’s performance slipped in FY20, 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 mainly due to non-execution of key contracts at MCL and weather-related Diluted EPS (INR) 27.1 17.4 22.0 21.6 disruptions at SECL. FY21 to date, MCL and NCL have fared better than other EPS growth (%) 23.3 (35.9) 26.5 (1.8) subsidiaries. Besides, these two subsidiaries outclass peers on both profitability and RoAE (%) 57.0 31.7 35.1 29.8 productivity. Hence, we expect MCL and NCL to provide a leg-up to CIL’s FY21 P/E (x) 4.7 7.3 5.8 5.9 financial performance. EV/EBITDA (x) 2.6 3.8 2.6 2.1 Dividend yield (%) 9.5 9.5 9.5 9.5 Evacuation infrastructure to complement production ramp-up We are upbeat about CIL’s focus on developing evacuation infrastructure; it is PRICE PERFORMANCE 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 200 42,000 180 38,600 Connectivity (FMC) projects—they would not only reduce reliance on road transport, 160 35,200 but also improve mechanisation and reduce the carbon footprint. 140 31,800 120 28,400 Execution of evacuation infrastructure projects is taking place mostly near MCL’s and 100 25,000 SECL’s large mines, wherein evacuation is a constraint. In our view, this Oct-19 Jan-20 Apr-20 Jul-20 infrastructure will complement the 52 capacity enhancement projects currently COAL IN Equity Sensex underway.
Outlook and valuation: Attractive dividend play Explore: 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 Financial model Podcast 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 Corporate access Video 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.
Amit Dixit Meera Midha +91 (22) 6620 3160 +91 (22) 4088 5804 [email protected] Meera.Midha@edelweissfin. com Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg EDEL
COAL INDIA
Financial Statements
Income Statement (INR mn) Balance Sheet (INR mn) Year to March FY20A FY21E FY22E FY23E Year to March FY20A FY21E FY22E FY23E Total operating income 9,60,803 8,58,634 9,20,232 10,21,944 Share capital 61,627 61,627 61,627 61,627 Raw Material Cost 60,836 52,834 68,398 71,817 Reserves 2,59,942 2,93,055 3,54,586 4,13,676 Employee costs 3,93,841 3,89,372 3,87,425 4,57,162 Shareholders funds 3,21,569 3,54,683 4,16,213 4,75,303 Other expenses 1,01,473 86,667 97,205 1,02,065 Minority interest 3,941 3,941 3,941 3,941 EBITDA 2,19,209 1,43,395 1,78,838 1,85,597 Borrowings 64,260 64,260 64,260 64,260 Depreciation 34,508 39,769 46,245 53,800 Trade payables 1,01,076 87,598 1,05,216 1,10,477 Less: Interest expense 5,029 4,092 4,092 4,092 Other liabs & prov 3,06,125 3,06,125 3,06,125 3,06,125 Add: Other income 61,054 45,150 54,584 52,083 Total liabilities 14,67,105 15,30,333 16,59,885 17,77,159 Profit before tax 2,40,713 1,44,684 1,83,086 1,79,788 Net block 3,67,455 3,97,686 4,61,441 5,07,641 Prov for tax 73,710 37,618 47,602 46,745 Intangible assets 953 953 953 953 Less: Other adj 0 0 0 0 Capital WIP 82,711 82,711 82,711 82,711 Reported profit 1,67,142 1,07,066 1,35,483 1,33,043 Total fixed assets 4,51,119 4,81,350 5,45,105 5,91,305 Less: Excp.item (net) 0 0 0 0 Non current inv 18,732 18,732 18,732 18,732 Adjusted profit 1,67,142 1,07,066 1,35,483 1,33,043 Cash/cash equivalent 2,85,465 3,16,534 3,92,835 4,75,215 Diluted shares o/s 6,163 6,163 6,163 6,163 Sundry debtors 1,44,082 1,46,767 1,38,665 1,25,993 Adjusted diluted EPS 27.1 17.4 22.0 21.6 Loans & advances 11,412 11,412 11,412 11,412 DPS (INR) 12.0 12.0 12.0 12.0 Other assets 4,00,548 3,99,790 3,97,388 3,98,755 Tax rate (%) 30.6 26.0 26.0 26.0 Total assets 14,67,105 15,30,333 16,59,885 17,77,159
Important Ratios (%) Free Cash Flow (INR mn) Year to March FY20A FY21E FY22E FY23E Year to March FY20A FY21E FY22E FY23E EBITDA (INR/t) 472.1 341.9 391.8 388.2 Reported profit 1,67,142 1,07,066 1,35,483 1,33,043 Staff Costs (% of sales) 41.0 45.3 42.1 44.7 Add: Depreciation 34,508 39,769 46,245 53,800 Output (t/worker) 2,192.0 2,145.9 2,416.9 2,671.3 Interest (net of tax) 5,029 4,092 4,092 4,092 EBITDA margin (%) 22.8 16.7 19.4 18.2 Others (2,40,799) 46,308 1,50,157 1,28,709 Net profit margin (%) 17.4 12.5 14.7 13.0 Less: Changes in WC 1,95,047 15,405 (28,122) (16,566) Revenue growth (% YoY) (3.5) (10.6) 7.2 11.1 Operating cash flow 41,465 1,75,022 2,60,253 2,56,333 EBITDA growth (% YoY) 3.8 (34.6) 24.7 3.8 Less: Capex 56,445 70,000 1,10,000 1,00,000 Adj. profit growth (%) 23.3 (35.9) 26.5 (1.8) Free cash flow (14,980) 1,05,022 1,50,253 1,56,333
Assumptions (%) Key Ratios Year to March FY20A FY21E FY22E FY23E Year to March FY20A FY21E FY22E FY23E GDP (YoY %) 4.8 (6.0) 7.0 6.0 RoE (%) 57.0 31.7 35.1 29.8 Repo rate (%) 4.4 3.5 3.5 4.0 RoCE (%) 55.8 26.5 30.1 26.4 USD/INR (average) 70.7 75.0 73.0 72.0 Inventory days 366 455 343 324 Production (mT) 602.2 560.0 599.2 629.2 Receivable days 38 62 57 47 Sales (mT) 581.8 546.9 585.1 614.4 Payable days 586 652 514 548 FSA Volumes (mT) 501.0 452.4 500.0 521.9 Working cap (% sales) 12.0 15.3 11.2 8.5 e-Auction (mT) 65.4 82.6 70.1 74.4 Gross debt/equity (x) 0.2 0.2 0.2 0.1 FSA Realisation (INR/t) 1,538.0 1,472.9 1,504.3 1,590.4 Net debt/equity (x) (0.7) (0.7) (0.8) (0.9) e-Auction Premium (%) 41.6 14.1 23.2 23.2 Interest coverage (x) 0 0 0 0
Valuation Metrics Valuation Drivers Year to March FY20A FY21E FY22E FY23E Year to March FY20A FY21E FY22E FY23E Diluted P/E (x) 4.7 7.3 5.8 5.9 EPS growth (%) 23.3 (35.9) 26.5 (1.8) Price/BV (x) 2.4 2.2 1.9 1.6 RoE (%) 57.0 31.7 35.1 29.8 EV/EBITDA (x) 2.6 3.8 2.6 2.1 EBITDA growth (%) 3.8 (34.6) 24.7 3.8 Dividend yield (%) 9.5 9.5 9.5 9.5 Payout ratio (%) 44.2 69.1 54.6 55.6
Source: Company and Edelweiss estimates
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COAL INDIA
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
9,500 NCL 7,600
5,700 MCL SECL 3,800 WCL (Tonnage per per person) (Tonnage ECL 1,900 BCCL CCL 0 -50 110 270 430 590 750
(PBT/t)
Source: Company, Edelweiss Research
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COAL INDIA
FY19: Productivity and profitability matrix
8,000 NCL
6,400
4,800 MCL SECL 3,200 WCL (Tonnage per per person) (Tonnage ECL 1,600 BCCL CCL 0 0 160 320 480 640 800
(PBT/t)
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 300 230
160
90 (INRbn) 20
-50
Capex
Others
Dividends
Inventories
Receivables
Otherassets
operations
Cashflow from Cashflow balance
Change in cash and in bank cash Change 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.
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COAL INDIA
Receivables by subsidiary
FY20 FY19 (INR mn) % 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
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COAL INDIA
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
FY21 % YoY FY20 % YoY FY19 Company AAP Target growth AAP Target Achieved % Achieved growth 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.
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COAL INDIA
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
FY20 FY19 OBR ratio (m3/t) Company 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 FY19 FY18 YoY Growth Sector AAP Target Diepatch (%) growth 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.
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COAL INDIA
FY20 revenue dip: Largely attributable to lower power volume/e- auction premium
930 920 910 900
(INR bn) 890 880
870
realisation
Non power Non
Revenue-FY20
Power volume Power
Revenue- FY19 Revenue- Power realisationPower
Non power volume Non 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
Revenue (INR mn) Volume (mt) Realisation (INR/t) FY20 % 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
Revenue (INR mn) Volume (mt) Realisation (INR/t) FY19 % 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
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COAL INDIA
#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 Sanctioned Capacity Sanctioned Capital (INR S. No. Name of Project Subsidiary Date of Approval (mtpa) 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).
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COAL INDIA
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
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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
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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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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:
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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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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.
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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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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.
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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
Underground Opencast Total Company 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
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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.
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Capex: Budgeted versus Actual over the years
FY20 % growth FY19 FY18 (INR mn) % shortfall Budgeted Actual (YoY) 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
No. of Equipment Indicated as % of CMPDI Norm
Equipment As on 1-4- As on 1-4- Availability Utilisation As on 1-4-2020 2019 2018 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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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
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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 Holdings – Top 10* Chairman Pramod Agrawal % Holding % Holding Director (Finance) Sanjiv Soni HDFC AMC 3.69 SBI MF 0.71 Reliance Capita 3.14 BlackRock Inc 0.61 Director S.N. Tiwary (Marketing) ICICI AMC 1.11 ABSL AMC 0.41 Director Binay Dayal (Technical) GIC 1.04 Lazard 0.32 Auditor Ray & Ray Vanguard Group 0.85 Franklin Resour 0.22
*Latest public data
Recent Company Research Recent Sector Research Date Title Price Reco Date Name of Co./Sector Title Coal India - Company Update - First Firm domestic prices; concerns in 03-Aug-20 165 Buy 24-Sep-20 Metals & Mining sign of recovery; Company Update China; Sector Update Coal India - Cash balance: Insulation 19-Jul-20 165 Buy 21-Sep-20 Metals & Mining Production cheer; Sector Update ag; Company Update Coal India - Result Update Q4FY20; Optimism pauses for the reality 29-Jun-20 165 Buy 17-Sep-20 Metals & Mining Value; Result Update check; Sector Update
Rating Interpretation Daily Volume TP TP TP 80 325 303 325 325 TP 275 TP 64 280 TP 243 235
235 48 (INR)
190 (Mn) 32
145 16 100 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 0 COAL IN Equity Buy Hold Reduce Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20
Source: Bloomberg, Edelweiss research Source: Bloomberg
Rating Distribution: Edelweiss Research Coverage Rating Rationale
Buy Hold Reduce Total Rating Expected absolute returns over 12 months
Rating Distribution* 161 64 14 239 Buy: >15%
>50bn >10bn and <50bn <10bn Total Hold: >15% and <-5%
Market Cap (INR) 176 59 12 247 Reduce: <-5% * stocks under review
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Additional Disclaimers
Disclaimer for U.S. Persons This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc.
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In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”).
This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person.
Disclaimer for Canadian Persons This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.
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Disclaimer for Hong Kong persons This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so.
Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.
Aditya Narain Head of Research [email protected]
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