Coal India Ltd Q1 FY23 Earnings Conference Call Insights

Key highlights from Coal India Ltd (COALINDIA) Q1 FY23 Earnings Concall

Management Update:

• [00:03:28] COALINDIA said it’s confident of achieving its target of 700 million tonne production in FY23.

Q&A Highlights:

• [00:05:12] Amit Dixit from Edelweiss asked about wage provisioning. Pramod Agrawal MD replied that last year the company had provided INR900 crore for wage increase in FY22. Again in FY23, COALINIDIA is providing INR100 crore per month and will increase it in coming quarters. The impact of wage negotiations is difficult to explain.

• [00:05:48] Amit Dixit from Edelweiss also asked about e-auction volume and pricing realization in 1Q23 and going forward.  Pramod Agrawal MD said that e-auction price in 1Q23 was INR4,340 and is expected to maintain in that range. And quantity was 20 million tonne and expects its 20-25 million tonne to continue through the year and end the year with about 80-90 million tonne of e-auction coal.

• [00:11:04] Vishal Chandak of Motilal Oswal asked about the 1 billion tonne production target and how soon can COALINDIA approach that target. Pramod Agrawal MD clarified that the company’s target is to achieve it by FY25. In FY23, COALINDIA is hopeful of achieving the target of 700 million tonne. If demand is good, the company expects to achieve the goal by FY25.

• [00:15:10] Pinakin Parekh from JPMorgan enquired about any risk in e-auction for prices or volume in terms of potential policy actions. Pramod Agrawal MD clarified that 90% of sales of COALINDIA is tied-up coal and there is hardly any profit. Only 10% of coal is e-auction in which COALINDIA makes profit and there is no windfall profit per se for COALINDIA.

• [00:15:37] Pinakin Parekh from JPMorgan also asked about the drivers of increase in receivables by around INR3,000-3,500 crores in June vs. March. Pramod Agrawal MD said that receivable increase was due to the pressure to maintaining the supply lines properly that might lead to power cuts. Therefore, COALINDIA had relaxed slightly during April-June period to maintain adequate stock for rainy season.

• [00:15:55] Pinakin Parekh from JPMorgan asked about the capex outlook for FY23. Pramod Agrawal MD answered that in FY22, the company did INR15,500 crore and in FY23, the company expects to reach INR16,500 crore.

• [00:25:37] Sanjay Parekh with Sohum Asset Managers asked that for renewables and alumina plants, what’s the payback threshold for these projects. Pramod Agrawal MD answered that in solar the company has to invest to become energy neutral in next 2-3 years. COALINDIA looks for IRR of at least 12% before investing in anything, but in alumina etc. the company won’t invest unless the IRR is much more than 12%.

• [00:30:30] Kamlesh Bagmar from Lotus Asset asked about the status of aluminum, fertilizer and coal gasification projects. Pramod Agrawal MD replied that in HURL, one plant has started and the other two will start soon. In TFL, there is a delay of about 18 months. In aluminum, the project is still on the drawing board.

• [00:32:38] Vipul Shah of Sumangal Investments enquired how many workers on avg. retire every day and what percentage of it is employed in underground mining. Pramod Agrawal MD said that currently the company has about 245,000 workers. Out of this 100,000 is in underground mine and 145,000 is in opencast. COALINDIA said about 5% of the manpower is reducing every year. Of this higher percentage is from underground and lower from opencast.

• [00:34:15] Vipul Shah of Sumangal Investments enquired by what time the company can see significant increase in washed coal volumes. Pramod Agrawal MD replied that there are two components of washed coal; coking coals and non-coking coal. Non-coking coal there is no purchaser of washed coals. In FY22, COALINDIA increased its washed coking coal production by more than 60-70% and in FY23, it’s going to increase by 70-80% further.