As analysts pore over the latest financial performance of Coal India, the world’s largest coal miner and the country’s second most valuable company after Reliance Industries, the company’s flat production growth, registering a minuscule 0.01%, is cause for concern, especially for the long term.
In 2010-11, market-driven sales at 30% helped CIL post a 12.94% increase in profit at Rs 10,867 crore, without any meaningful addition to volumes. Sales realisations were up by 12.59% at Rs 50,233 crore, which according to Angel Broking, were mainly from higher realisations during Q4.
CIL’s net sales, during the fourth quarter, increased 18.3% quarter to quarter at Rs 15,016 crore with average price realisation going up by 15.1% during the last quarter at Rs 1,316 per tonne for the price increase made in February. But production during the last quarter fell 2.9% at 132 mt, though sales volume remained steady for pithead stocks, Angel Broking analysts point out.
However, CIL’s cash balance has gone up to a whopping Rs 43,000 crore, while net worth is Rs 33,316 crore. CIL’s market capitalisation has become the second highest after Reliance Industries. The company’s market capitalisation reached Rs 2.50 lakh crore on May 17, its highest recorded so far.
CIL’s in-house analysts find that the factors that contributed to the growth in net profit from Rs 9,622 crore in 2009-2010 to Rs 10,867 crore in 2010-2011 were higher realisation from e-auction, sales from memorandum of agreement, increased sales of washed coal and, to some extent, sales of hard coking coal. Sales under these categories were at market-driven prices giving higher margins.
The 150% price increase for A-B grades of coal and 30% price increase for C grades and below (for non-regulated sectors) if spread across the board is effectively a 12% price increase. This had its impact for only one month, actually contributing less than 1% to whole year’s profit, CIL’s internal analysts said.
Of the Rs 50,233 crore net sales, Rs 35,752 crore or 70% of the total sales, came through fuel supply agreements (FSAs) ? though it did not contribute much to the profit. CIL, for the first time, had 30% market-driven sales, of which e-auction contributed the most.
Coal sold in e-auctions in 2010-2011 got an 81% premium on Rs 920 per tonne (average notified price) against the 63% premium it commanded in 2009-2010 on the same average notified price.
Average e-auction price this fiscal was Rs 1,846 per tonne and it fetched CIL Rs 8,810 crore by selling only 45.67 mt of its 431.32 million tonne production in 2010-2011.
E-auction contributed 17.54 % to total sales. This was followed by increase in sales of washed coal, which was 7.82% of the total sales fetching Rs 3,927 crore, an increase by Rs 766 crore against last year’s washed coal sales.
Sales of MoA coal was 4.4% of the total sales, which fetched Rs 2,212 crore and hard coke sales was 0.26% of the total sales which fetched Rs 132 crore. So, higher realisation came from these segments, which actually contributed to the profit.
Further, tax rate during the last quarter was lower at 29% against 37.6% in the third quarter for which net income in the fourth quarter increased by 60.7% at Rs 4,221 crore on quarter to quarter basis, Angel Broking analysts pointed out.
The comparisons have been made on quarter to quarter basis since this is the first year after CIL got listed and figures of corresponding periods are not available.