CIL’s higher capex likely to hit FY21 bottom line

By: |
April 9, 2021 12:30 AM

CIL’s more than double capital expenditure at Rs 13,115 crore in FY21 against Rs 6,270 crore in FY20 had to be met through internal accruals putting pressure on the company’s balance sheet.

The rise in expenditure is mainly on the count of capex enhancement while it had to offer relaxed conditions to attract customers, which led to lower revenues. For e- auctions the company had to concentrate more on volumes than premiums, a bottom line enhancing revenue stream.The rise in expenditure is mainly on the count of capex enhancement while it had to offer relaxed conditions to attract customers, which led to lower revenues. For e- auctions the company had to concentrate more on volumes than premiums, a bottom line enhancing revenue stream.

Public sector miner Coal India’s bottom line for fiscal-21 may go well below its 2020 net profit at Rs 16,714 crore owing to the increased expenditure amid low revenue realisations due to the pandemic.

The rise in expenditure is mainly on the count of capex enhancement while it had to offer relaxed conditions to attract customers, which led to lower revenues. For e- auctions the company had to concentrate more on volumes than premiums, a bottom line enhancing revenue stream.

CIL’s 2020 net profit was 4.3% down compared to the net profit in FY19, and the Q3 net profit in FY21 at Rs 3,084 crore was down 21.4%. The company’s revised capex target came in January, which means it’s last quarter finances have been considerably affected with cash reserves and surpluses further depleting. CIL’’ cash reserve as of December 2020 was at Rs 28,448 crore.

CIL’s more than double capital expenditure at Rs 13,115 crore in FY21 against Rs 6,270 crore in FY20 had to be met through internal accruals putting pressure on the company’s balance sheet. The company initially kept its capex for FY21 at Rs 10,000 crore but revised it to Rs 13,000 crore and finally achieved 101% of its capex target.

Capex growth during all the four quarters of the concluded fiscal was significantly higher compared to the previous fiscal. Utilization was more than the ministry’s mandate. “This marked CIL “excellent” under this specific parameter in MOU rating , and for the first time ever, it had to tweak its capex budget by 30%,” a senior company executive said, adding that the public sector miner did this going by the government’s direction to the CPSUs for increasing expenditure to boost the economy.

Procurement of heavy earth moving machinery at Rs 3,453 crore topped the list of capex heads followed by land at Rs 2,470 crore, yet another important capital of CIL.

Capex in joint ventures, in proportion to CIL’s shareholding, like Talcher Fertilizers Limited and Hindustan Urvarak & Rasayan Limited, accounted for Rs 2,194 crore. CIL’s coal evacuation initiatives, which include setting up coal handling plants, silos and constructing sidings, accounted for Rs 1,398 crore and rail corridors and railway lines construction summed up Rs 1,166 crore.

CIL and five of its subsidiaries CCL, NCL, WCL, MCL and CMPDIL, also revised their respective capex targets. SECL did not surpass its revised budgeted target but it was the highest spender among all CIL’s subsidiaries spending Rs 3,260 crore.

“Though as an immediate impact the high capex will hit the bottom line yielding lower dividend and tax payouts, it will yield positive results in ensuing years in terms of production and coal transportation”, the company official said.

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