Coal India Ltd Q3 FY22 Earnings Conference Call Insights

Key highlights from Coal India Ltd (COALINDIA) Q3 FY22 Earnings Concall

Management Update:

• COALINDIA YTD surpassed the quantum of dispatches done last year on 31 March, 2021 and expects this year dispatches to be ever highest in the range of 660-670 million tonnes.

• Production is also expected to be high in FY22, with the company already 25 million tonnes ahead of what was produced the same period last year.

Q&A Highlights:

• Prashanth Kota from Dolat Capital asked about pricing of G1 to G5 grades. Pramod Agrawal Chairman said that in G1 to G5, the availability of coal in Coal India is very less. Just because international price increase, the company cannot increase the price suddenly breaking the contracts. However, small portion of which is auctioned, there the company is getting good premium and their price will be also considered whenever overall price increase takes place.

• Amit Dixit from Edelweiss asked about the status of wage negotiation. Pramod Agrawal Chairman said that on wage negotiation, the company had the third round of negotiation. But the company doesn’t foresee wage negotiation getting concluded in the next 3-4 months. However, COALINDIA will try to conclude it by end of FY23.

• Amit Dixit from Edelweiss asked about any possibility of price hike in the next 2-3 months. Pramod Agrawal Chairman said that on price hike, the company expects it to take place immediately as it has become very urgent for COALINDIA. And for subsidiaries it has become important that without price increase it will be difficult to survive.

• Rahul Jain of Systematix asked about volumes for next year. Pramod Agrawal Chairman replied that the company expects production to grow next year, at least 10% or in that range. COALINDIA expects the dispatches to be in the range of 700 million tonnes and production also to be in that range.

• Rahul Jain of Systematix also asked about wage provisioning. Pramod Agrawal Chairman answered that the company is providing about INR100 crore per month. The company added that it will be difficult to predict the wage negotiation. Wage increase depends on the growth that takes place in the economy.

• Rahul Modi with ICICI enquired that e-auction volume and pricing post December. Pramod Agrawal Chairman replied that e-auction in January, the premium was about 100% and e-auction total was 86 million tonne till December, 3% higher than last year.

• Rahul Modi with ICICI also enquired about contractual expense as there has been a constant increase due to fuel price hike. Pramod Agrawal Chairman answered that on a per tonne basis it is expected to normalize at the current level. There has been a significant impact on expense due to diesel. In the nine-months, contractual plus own diesel consumption will be more than INR2,000 crore. COALINDIA doesn’t see it likely going up in coming months.

• Rahul Modi with ICICI asked about restocking at power plants and when does the company see restocking happening. Pramod Agrawal Chairman said the company hasn’t reduced the supply to NRS. In a normal year, FY20, COALINDA has given 10% more to NRS sector. The company added that if the company is able to maintain the production level at the level of Jan. or Dec., there will not be shortage of coal and the increased requirement of NRS will be met.

• Murtaza Arsiwala of Kotak asked what is the capex the company has been able to do against the original guidance YTD and FY22 and guidance for FY23. Pramod Agrawal Chairman said for FY22, COALINDIA will be doing about INR15,500-16,000 crore. In FY23, COALINDIA said it should try to complete INR17,000 or go beyond that.

• Murtaza Arsiwala of Kotak also asked that for nine-months up to December 2021, how much of the INR15,500 crore the company has spent. Pramod Agrawal Chairman replied that the company has spent about INR10,500 crores.

• Vipul Shah with Sumangal Investment asked that in what timeframe the 700 million tonnes of coal projects will be implemented and if the capacity will be 1,600 million tonnes after all the projects are implemented. Pramod Agrawal Chairman said that some of the projects will outlive their life also. Therefore, 700 million tonne, the extra coal that projects will generate will take another 4-5 years to come in place. So if all the coal is produced, by 2030 about 1,200-1,300 tonne coal can be produced.

• Raashi Chopra of Citigroup  asked about the net cash on the company’s book as of Dec. 2022. Pramod Agrawal Chairman said that as of Dec. it was INR28,000 crores.

• Raashi Chopra of Citigroup  also asked about the meeting for wage negotiation yesterday and what was asked from the union. Pramod Agrawal Chairman said that the union is asking for 50% increase in everything. And those asks have got no meaning.