Coal India Ltd:Annual Report 2023-24 Analysis

3-Year Trend Analysis of Key Financial Metrics #

• Revenue from Operations: Fluctuating trend, with operations increasing by 3% from ₹138,251.91 crores in FY22 to ₹142,323.98 crores in FY24, after a decrease from ₹144,811.72 crores in FY22.
• Net Sales: Increased by 2.2% from ₹127,627.47 crores in FY23 to ₹130,325.65 crores in FY24
• Profit Before Tax (PBT): Increased by 13% from ₹43,274.60 crores in FY23 to ₹48,812.61 crores in FY24.
• Profit After Tax (PAT): Increased by 18% from ₹31,722.98 crores in FY23 to ₹37,369.13 crores in FY24.
• Earnings Per Share (EPS): Increased from ₹51.54 in FY23 to ₹60.69 in FY24, reflecting improved profitability.
• Dividend Per Share (DPS): Increased from ₹24.25 in FY23 to ₹25.50 in FY24, including proposed final dividends.
• EBITDA Margin on Net Sales: Increased, indicating improved operational efficiency.
• Net Profit Margin on Net Sales: Increased, reflecting improved profitability.

Business Segment Performance #

• Coal Production: Coal production increased by 10% year-over-year, with a total production of 773.647 million tonnes in FY24, against a target of 780.20 MT..
• Offtake: Total coal offtake increased by 8.47% to 753.52 million tonnes in FY24, compared to 694.68 million tonnes in FY23.
• Coking Coal Production: Grew by 10.65% to 60.433 million tonnes in FY24, up from 54.618 million tonnes in FY23.
• Underground (UG) Production: Increased after 14 years, reaching 26.021 million tonnes in FY24, a 2.10% growth from the previous year.
• Overburden Removal (OBR): Surpassed the annual target with 1964.144 million cubic meters extracted, achieving 106.89% of the target.

Major Strategic Initiatives and Their Progress #

• Mine Developer Operators (MDOs): Work orders were issued for 13 out of 15 identified MDO projects, and mining operations have started in 4 projects.
• Project Approvals: 16 coal mining projects were approved in FY24, with a total sanctioned capital of ₹27,087.69 crore.
• First Mile Connectivity (FMC) Projects: 75 FMC projects are under implementation in 4 phases, aiming to enhance mechanized coal transportation and loading systems.
• Underground Mining: 6 continous miners were deployed, and the declining trend in UG production has been arrested for the first time in 14 years.
• Abandoned Mines: 11 Abandoned mines were awarded during FY24, and a total of 24 such mines have been awarded.
• Diversification Initiatives: Five diversification initiatives (including thermal power plants and coal-to-chemicals projects) have obtained approvals from the Cabinet Committee in Economic Affairs (CCEA).
• Renewables: installations stand at approximately 82.68 MW with 71.63 MW solar capacity commissioned during FY24.
• Critical Minerals Value Chain: CIL is pursuing the acquisition of critical minerals like lithium and cobalt, domestically and internationally, to reduce import dependence.

Risk Landscape Changes #

• Operational Safety Risks: Introduced new Occupational Health and Safety Policy and enhanced Safety Management Plans (SMP) for each mine to mitigate operational safety risks.
• Cyber Security Risks: Finalizing ISMS based on ISO 27001 and developing a data privacy and protection program in view of the DPDP Act, 2023.
• Evacuation Risks: Implemented 75 First Mile Connectivity (FMC) projects to enhance mechanized coal transportation. Installation of captive mode (Belt/MGR) for power plants located near mines.
• Competition Risks: Production targets were aligned with projected demand figures to mitigate competition risks from commercial mining and renewables.

ESG Initiatives and Metrics #

Environmental #

• Planted 2,167.61 hectares of forest cover, exceeding the annual target of 1,820 hectares.
• Developed 2 new eco-parks in NCL and WCL, totaling 32 eco-parks.
• Utilized 2,595.29 lakh KL of mine water for internal and community use.
• Reduced CO2 emissions by 33,108 tonnes per annum in FY24.

Social #

• Spent H654.49 crore on CSR initiatives, exceeding the statutory requirement.
• Inaugurated medical and cardiac care facilities in Odisha.
• Supported 500 underprivileged children through the ‘Thalassemia Bal Sewa Yojana’.

Governance #

• Complied with Corporate Governance conditions as per SEBI (LODR) Regulations 2015.
• Established a Complaint Handling Policy and Whistleblower Policy.
• Implemented an Integrated Project Monitoring System.

Management Outlook #

• Production Targets: CIL aims to achieve 1 billion tonnes of coal production by FY26, aligning with the Atmanirbhar Bharat initiative.
• Capital Expenditure: CIL plans a capital expenditure of ₹15,500 crore for FY25 to support expansion and modernization projects.
• Diversification: Continued focus on diversification into renewable energy, thermal power plants, coal gasification, and critical minerals to create new revenue streams.
• Sustainability: CIL is committed to sustainable mining practices, environmental conservation, and achieving net-zero emissions.
• Global Energy Conglomerate: In the long term, CIL is aspiring to expand beyond the current geographical boundaries in the minerals sector, and emerge as a contemporary GLOBAL ENERGY AND MINERAL CONGLOMERATE that operates in a professional and consumer-friendly manner while staying committed to sustainable developmental goals.

Detailed Analysis #

Financial Analysis of Coal India Limited (Standalone) #

Balance Sheet Analysis #

3-Year Comparative Analysis of Assets, Liabilities, and Equity #

(H in crore)

Significant Changes in Major Line Items (>10% YoY) #

• Non-Current Assets: Increased by H 107.52 crore (0.54%) due to Increase in Property Plant & Equipments, Capital Work-in-Progress.
• Other Equity: Increased by H 619.28 crore mainly due to increase in Retained Earnings during the year.

Working Capital Trends #

(H in crore)

Analysis: #

Working capital has increased by 16.89% in the current year. Increase in Current assets is more when compared to Current liabilities.

Asset Quality Metrics #

Allowance for Doubtful Debts/Advances to Total Assets:

(H in crore)

Analysis: #

• There is no increase in the ratio.

Debt Structure and Maturity Profile #

• Long-Term Borrowings: No long term borrowings
• Short-Term Borrowings: Nil
• Lease liabilities : Current maturity is H 77.72 Cr and Non current maturity is H 156.29 Cr.

Off-Balance Sheet Items #

• Contingent Liabilities: H 997.08 crore (PY H 971.89 crore) primarily related to claims against the company not acknowledged as debt.

• Commitments: H 471.65 crore (PY H 235.58 crore) for the estimated amount of contracts remaining to be executed on capital account and not provided for.

• Guarantees:

  • Eastern Coalfields Limited and Mahanadi Coalfields Limited to the extent of their obligations under loans (principal and interest) from Export Development Corporation, Canada and Natixis Banque, France.

  Outstanding balance as on 31.03.2024: H 157.99 crore and H 3.95 crore, respectively.

Industry Benchmark Comparisons #

• Capital Expenditure: CIL’s significant investment in CAPEX indicates a commitment to growth and operational efficiency, which is generally positive compared to industry peers making lower investments.
• CSR Expenditure: An increase in CSR spending indicates a strong commitment to social responsibility, which can enhance the company’s reputation and social license to operate, potentially better than peers with stagnant or declining CSR spend.
• Profit Margins: Higher Profit After Tax indicates a good operational efficiency compared to previous year.

Operating Performance #

Revenue Breakdown #

• Total Net Sales for FY2023-24 were ₹ 1,30,325.65 crore, 2% Up from FY2022-23.
• FSA sales increased by ₹11,439 crore, with volume growth and a 4% increase in average price per tonne.
• E-auction volume grew by 13%, but average price decreased by 37%, negatively impacting sales by ₹8,689 crore.

Cost Structure Analysis #

• Employee Benefits Expenses were the largest expense category, representing 48% of total expenses. This category decreased by 1% in FY2023-24.
• Cost of Materials Consumed decreased by 15% in FY2023-24, mainly attributed to lower prices of explosives and bulk diesel.
• Contractual Expenses increased significantly by 19%.
• Stripping Activity Adjustment has become major contributor or deterrent to Profit Before Tax.

Margin Analysis #

• Operating Profit Margin increased to 30% in FY 2023-24 from 28% in FY 2022-23.
• Net Profit Margin increased to 28.67% in FY 2023-24 from 24.86% in FY 2022-23.
• EBITDA Margin increased to 39.74% in FY 2023-24 from 37.39% in FY 2022-23.

EPS Analysis #

• Basic and Diluted Earnings Per Share (EPS) increased to ₹60.69 in FY2023-24 from ₹51.54 in FY2022-23 (restated).
• The increase reflects the company’s improved profitability during the fiscal year.

Strategic and Management Analysis of Coal India Limited #

Long-Term Strategic Goals and Progress #

• Coal India aims to achieve 1 BT of coal production by FY 2025-26, aligning with India’s Atmanirbhar Bharat initiative to reduce import reliance.
• The company is diversifying into renewable energy, targeting 3 GW of solar power by 2025-26 and 5 GW by 2029-30, to become a net-zero energy company.
• Coal India is making a strategic entry into the critical minerals sector to reduce import dependence on assets like lithium and cobalt.
• Long-term aspirations include expansion into the international minerals sector, aiming to become a global energy and mineral conglomerate.
• Production from UG mines showed arrested declining trend, and bettered previous year.

Competitive Advantages and Market Positioning #

• Coal India holds approximately 48% of India’s total proven coal reserves.
• As the largest domestic coal producer, CIL supplies over 80% of India’s coal, meeting 40% of the country’s primary commercial energy requirement.
• CIL is a key supplier to the power sector, achieving 101.59% of the 610 MT demand projected by the Ministry of Power and Central Electricity Authority in FY 2023-24.
• FY 2023-24 marked the second consecutive year of double-digit production growth, a first since the company’s inception.

Innovation Initiatives and R&D Effectiveness #

• CIL is adopting advanced digital mine planning techniques such as Minex, Surpac, MineSched, and MineScape, to enhance process visibility and efficiency.
• R&D efforts include improving exploration, harnessing Coal Bed Methane (CBM) and Coal Mine Methane (CMM), and advancing coal gasification technologies.
• Ongoing R&D projects (18 ongoing, 22 Science and Technology projects) are focused on improving operational efficiency, safety, and environmental impact mitigation.
• Implementation of VR training for safety, mock drill.

M&A Strategy and Execution #

• The establishment of Bharat Coal Gasification and Chemicals Ltd., a joint venture with BHEL, represents entry into cleaner energy solutions and downstream diversification.
• Non-Disclosure Agreements (NDAs) with asset owners have been executed for potential acquisitions of critical mineral assets abroad.
• CIL has participated in the first tranche of the e-auction of critical mineral blocks offered by the Ministry of Mines and will continue to participate in such acquisition of blocks.

Management’s Track Record in Execution #

• Coal production reached 773.647 MT in FY 2023-24, a 10% growth, marking the second successive year of double-digit growth.
• Overburden Removal (OBR) surpassed the annual target, achieving 1964.144 million cubic meters, indicating readiness for future production ramp-up.
• Sixteen coal mining projects with a total capacity of 170.46 MT/Y were approved during the FY 2023-24.

Capital Allocation Strategy #

• Record CAPEX of ₹23,475.41 crore in FY 2023-24, a 26% increase over the previous year, indicates focus on enhancing operations and funding growth projects.
• Dividend payout of ₹15,714.99 crore at H 25.50 per share in FY 2023-24 aligns with the goal of providing stable returns to shareholders.
• Strategic investments are being made in thermal power plants, renewable energy projects, and coal-to-chemical initiatives to diversify revenue streams.

Organizational Changes and Their Impact #

• Amendments to the Memorandum of Association have been made to include a focus on the critical minerals business value chain, aligning with India’s self-reliance goals.
• The company has implemented SAP ERP system for improved operations

ESG Initiatives and Performance #

Environmental Metrics and Targets #

• Afforestation efforts covered 2,167.61 hectares in FY 2023-24, exceeding the annual target of 1,820 hectares.
• Plantation area exceeded 2,000 hectares for the first time, in FY 2023-24.
• Mine water utilization for community supply benefited 11.62 lakh people across 857 villages.
• Energy efficiency measures resulted in an annual saving of 12.84 million units of electrical energy.
• CO2 emission reductions achieved through energy efficiency measures amounted to 105,319 tonnes per year.
• Solar power generation installations stand at approximately 82.68 MW, with 71.63 MW commissioned during FY 2023-24. Solar power generation reached 20.219 million units by the end of FY 2024.
• Specific Energy Consumption was 5.72 KWh/T during 2023-24, a decrease by 14.41%.
• Scope 1 emissions for FY 2023-24 totaled 26,424,706 GJ, and Scope 2 emissions were 82,41,497 GJ.
• Total energy consumption for FY 2023-24 was 1,72,74,205.44 GJ, with 1,72,01,416.33 GJ from non-renewable sources and 72,789.10 GJ from renewable sources.
• Water consumption for FY 2023-24 stood at 5853.443 KL. Water reuse totaled 5186.71 lakh KL.
• 90.03% of discharged mine water was utilized for internal and community use, and 54.57 lakh KL of mine water was supplied to nearby communities.

Social Responsibility Programs #

• CSR expenditure for FY 2023-24 totaled ₹654.49 crore, exceeding the statutory requirement of ₹547.59 crore.
• Healthcare, nutrition, and sanitation received ₹251.04 crore in CSR spending.
• The Thalassemia Bal Sewa Yojana received ₹10.61 crore, assisting 500 underprivileged children with bone marrow transplants.
• Environmental and sustainability initiatives under CSR received ₹22.68 crore.
• Education and livelihood initiatives received ₹124.53 crore in funding.
• Approximately 3.5 crore people were impacted through CSR activities.
• Skill development and livelihood enhancement initiatives covered 11,000 people.
• A total of 316,225 standard housing units are available.

Governance Structure and Effectiveness #

• The Board of Directors includes 6 Functional Directors, 2 Non-Executive Directors (Government Nominees), and 7 Independent Directors.
• Board meeting attendance was 95.83% for the FY 2023-24.
• The company has a Vigilance Division and Whistleblower Policy, resolving 135 corruption complaints and taking action in 9 instances.
• The company has received ISO 37001:2016 Certification for Anti-Bribery Management System in CMPDIL
• Complied with Corporate Governance guidelines and SEBI regulations.

Sustainability Investments and ROI #

• Investing in renewable energy, targeting 3,000 MW of solar power capacity.
• Installed 71.63 MW of solar power projects during FY 2023-24 and generated 20,219,196 kWh of solar energy, resulting in a CO2 emission reduction of 16,580 tonnes.
• CSR spending for FY 2023-24 increased by 14% to ₹574.58 crore.
• First Mile Connectivity (FMC) projects are estimated to cost approximately ₹24,750 crore.
• Commissioned the operational Madhuband Washery of 5 MTY.

Regulatory Compliance and Future Preparations #

• Complied with Corporate Governance guidelines and SEBI regulations.
• Targeting 1 billion tonnes of coal production by FY 2025-26.
• 119 ongoing coal projects with a total sanctioned capacity of 896 million tonnes per year (MTY) and a sanctioned capital of ₹ 133,576 crore.
• During FY 23-24, one coal mining project with a sanctioned capacity of 20 Mty and a sanctioned capital of ₹ 1783.09 crore was completed.
• Identifying and exploring opportunities for acquiring critical mineral assets.
• Entered into various MoUs with state and private entities.
• Exploring opportunities for collaboration in R&D.