Ladies and gentlemen, good day and welcome to the 3Q FY 2022 earnings conference call of Coal India, hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Chandak from Motilal Oswal Financial Services. Thank you, and over to you, sir.
Thank you, Vidya. Good evening, everyone, and welcome to the third quarter FY 2022 earnings call of Coal India Limited. This is Vishal Chandak from Motilal. I would like to thank Shri Pramod Agrawal, Chairman and Managing Director of Coal India, for giving us this opportunity to host another call. Without much ado, I would like to hand over the floor to Mr. Agrawal for his opening remarks, followed by which he would open the floor for Q&A. Over to you, sir.
Good evening, everyone. We have completed third quarter, and we have announced our results. To my understanding, despite the difficult circumstances in which we were working, our performance in last nine months have been significantly better than last year. We must keep in mind that while evaluating this performance, we must keep in mind that the first three months were very difficult for Coal India because the time was very difficult because of COVID situation, and we lost many of our miners, many of our officers in that time period. Secondly, the rainfall in our area was especially very high this year. On one day in ECL, there was a rainfall of about 400 mm, and this resulted in submergence of almost all the mines of ECL.
In ECL area for a couple of days or maybe a week, there was almost zero production because none of the mines were in the condition where we could have operated. In other areas also the rainfall was very heavy. Despite that, our results are quite satisfactory. Today is a great day for us because today we have surpassed the dispatch that we did last year, on 31st March. We are looking forward that this year the dispatch will be ever highest, much higher than anything that we have achieved till now. I am targeting that the dispatch will be in the range of 660-670 million tonne. Secondly, our production this year also is likely to be very high.
We are already about 25 million-30 million tonnes ahead of what we did last year in the corresponding till today. I'm looking forward that maybe we will end up this year with a production of more than 630 million tonne. We are targeting that we should try to achieve 630 million tonne, but that is a slightly difficult target. We will put everything to achieve this. We have supplied a huge quantity of coal to power sector. I think that dispatch this year compared to last year is 17%-18% higher than what we did last year or any other year, which was a normal year.
If we compare the dispatches to non-regulated sector also, we are maintaining a dispatch of about INR 3.2 lakh-INR 3.25 lakh tonnes per day, which is more than what we did in FY 2020 or FY 2019. In FY 2021, definitely we have given slightly more coal to non-regulated sector because the demand in power sector was less. However, today everybody wants that coal should be supplied by Coal India because our prices are very low compared to international market. Replacing the whole thing in a year is slightly difficult, but in the coming years we will definitely increase our production.
If our performance remains good in first quarter of next year, which I expect that it will be, then perhaps in next year that a lot of demand or lot of import that is taking place can be replaced by Coal India. With this opening remark, I would like you to ask questions so that we can explain if there is any doubt.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to please limit their questions to two per participant and use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prashanth Kota from Dolat Capital. Please go ahead.
Sir, good evening, and thanks for the opportunity, and congrats for a good set of results. Sir, my question is regarding the pricing of G1 to G5 grades, wherein earlier we had some flexibility, you know, to keep the prices of these grades on some discount to import parity basis, et cetera. Where are these prices now, and what is the thought process in thinking around these prices, because international prices are quite high?
Just wanted you to know your thoughts and latest situation on this, sir.
See, from G1 to G5, availability of coal in Coal India is very less. Most of their coal is given to NRS sector, and which is linked to their
Indues.
Indues. Secondly, it is based on linkage auction. Just because the international price has increased, we cannot increase that price suddenly breaking the contract. But a small portion of which, it is auctioned, there they are getting very good premium, and their price will be also considered whenever this price, overall price increase takes place.
Okay, sir. Understood. Thanks, sir. That's it from my side.
Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead.
Thanks for taking my question, sir, and congratulations for a good set of numbers. I have two questions. The first one is, on the status of wage negotiation, where we are now, when we expect this to be completed? Also if there is a possibility of price hike in next two, three months? That is the first question. The second one is a more bookkeeping question, essentially on receivables that you have on books, on January end, or if you can, mention for February 15th, that would be great. Thank you.
Coming to the first question on wage negotiation. Wage negotiation. Yesterday we had the third round of meeting. I don't foresee wage negotiation getting concluded in next 3-4 months, but definitely we'll try to conclude it by end of FY 2023. It depends how it goes and where the stand that both of us take. So it will be very difficult for me to give you the timeline for it because never before wage negotiation has been completed in one year time. Only once it got completed in 10 months. It generally takes slightly longest time. We are very keen that it should be concluded well in time and maybe by FY end of FY 2023 it will be concluded. The second thing is price hike.
I'm trying to bring everybody on board, and for me, every day is critical. I hope price hike should take place immediately. It has become very urgent for Coal India and for certain subsidiaries. It has become so important that without that, it will be difficult for them to survive. I can't tell you what is the receivables on fifteenth of February as such, but it is constantly going down. At December end it was INR 13, net was INR 13,000.
31st December, it is INR 15,000.
It is now INR 13,000. On 31st of January it was INR 13,000. On 31st of December it was INR 15,000. I think we should get back to that stage, which was earlier by the end of March. Some of the state governments have requested us to bear with them till March end, and they have agreed that by March end they will clear most of their dues. I am quite hopeful that we should come in the range of -INR 10,000 by the end of March.
Thanks, sir. That's very helpful. I will get back in the queue.
Thank you. The next question is from the line of Rahul Jain from Systematix. Please go ahead.
Yeah, hi. Good evening, sir. Thanks for taking my question. Sir, I have a couple of questions. Firstly, on your volumes, how do we look at volumes for next year? Because this year we have sold from our opening stocks about 16 million tonnes. Next year, although say probably we may see a 4%-5% volume growth, but on dispatch front we may just see 1%-2% growth. Is that assessment right?
I couldn't get your question. Please repeat.
This year so far we have sold about 16 million tonnes from opening stocks, and that's why we're seeing this good offtake growth of about 12%. For next year, how do you see the situation? Because our typical volume growth has been around 4-5%. Like, you know, we may have to replenish our stocks and things like that. Are we looking at a flat year in volume for next year?
No. See, next year our production should grow. This year we'll be ranging at 630. I am looking for a growth of about at least 10% or something in that range. Because last year our performance in production was very bad in April, May, June because of COVID situation. We were producing something like INR 14 lakh tonnes per day, whereas our capacity to produce in any quarter is about INR 18-19-20 lakh tonnes. We'll try to maximize this. If we are able to perform well in the first quarter, that will give us about 40 million tonnes extra coal, and that itself will be adequate to propel our growth. I am looking forward that next year the dispatches will be in the range of 700, and production should also be in that range.
Yeah, you are right to an extent that this year we got a support of whatever stocks we had last year. There were constraints also in this year in production front because of COVID and the heavy rainfall. I don't think this will get repeated this year. If there is a COVID situation, if there is a very heavy rainfall like last year, perhaps then at that point we will make the corrections. Today I'm quite hopeful that we will be able to give a substantial growth next year.
Right. Okay. Sir, my second question is on your wage provisioning. It's six months have already passed, and have you done any provision so far? What kind of quantum, if suppose it's the last hike what we had, a similar kind of a hike happened this time? What is the provision which has not been done so far?
We are providing about INR 100 crore per month. It will be difficult for me to say what the wage negotiation will be. If you see all the factors which are prevailing in the economy, wage increase also depend on the growth that takes place in the economy because that growth gets compensated. The DA, I think, has the Dearness or the inflation gets compensated in Dearness, but the growth plus something is gets reflected in this thing. To my understanding, this would be in the same range, but it will be difficult for me. Maybe slightly more provisioning need to be.
Sir, why I'm coming to this is because the last time when we had this wage increase, I think the total cost went up by almost like INR 15,000 crore. INR 100 crore is, you know, really very useless number in-
I think it went up by about INR 4,000-something crore, not INR 15,000 crore. It was not INR 15,000 crore.
INR 4,500.
INR 4,500 crore or so.
Right.
I concede that it was INR 1,200 crore, INR 13 crore, INR 100 crore may not be adequate, but we'll provide something more in coming months.
Right. Thank you so much.
Thank you. The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead.
Good afternoon, sir. Congrats. Great set of numbers and thanks for the very liberal dividend. Really appreciative of that. Sir, a couple of questions. How has the e-auction volumes and pricing been post December? And how is the demand itself from the NR sector and our supplies to that sector been?
The e-auction thing in January, our premium was about 100%. We got about 100% premium on that. The this e-auction total was, can you tell?
Booked quantity is 873.
In January.
Uh, total-
Total. Till January, and it is 86 million tonnes.
It is 3% higher on the same period last-
It is 3% higher than the last year.
Up to December.
Up to December.
Yes.
This January, what is the?
January, we are slightly less. Up to December, it is 3% higher than the last year.
We are doing slightly better than the last year, but the quantum has increased slightly 3% or 4%, but the premium in January was in the range of 100%. If we offer in spot more, perhaps the premium will be higher because in spot we get much higher this. The lifting too also has been good. It is more than what it has happened last year. I don't have figures right now, but I will tell you in a while.
Sure. Sir, we did close to around, in the 1st nine months, we've done around 83 million tonnes. Are you comfortable touching obviously more than 100 for the full year?
I am quite hopeful that we'll do more than 110 million tonne, which we did last year 120 million tonne, no, 124 million tonne. I am thinking our production is increasing now. Today, we have reached 23.5. Once we cross this 24, we will offer much more quantity for e-auction also. Maybe not 124, but 110 or 115 type we will definitely achieve.
Right. Perfect. Sir, on the employee cost and, you know, the contractual expenses. Now employee cost, if you see, we've done around close to around INR 30,000 crore for the 1st nine months. Any actuarial or something booked on a YoY basis, anything?
There was a provision of about INR 800 crore for CPRMSE, means for medical after retirement.
INR 800 crore. This is a provision. This is non-cash, is it?
Yeah, this is non-cash.
This is over and above the INR 800 crore. We've done INR 600 crore of wage provision.
Yeah, that's right.
Wage provision, we've only done for six-
INR 400 crore, sir. That's what the person said.
Pardon?
Hello?
Please repeat.
Yes, Rahul.
Wage revision, we've done only for six months, or we've done INR 600 crore so far, is it?
Yes. It started from 1st of July, since the wage revision is applicable. We have started from 1st of July only.
Okay. Okay. Perfect. Sir, how do you see the contractual expenses? Because obviously, due to the fuel price hike, there has been a constant increase. How do you see this normalizing, at what level? Obviously subject to, the input cost. How do you see this moving?
I think short-term basis, this will normalize at this level. One doesn't know where the petroleum prices will go. Nobody expected that the petroleum prices will breach the INR 100 , $100 mark. It has not breached that yet, but it reached to $96-$97 per barrel. Nobody expected that. There has been a significant impact on our expenditure because of diesel. I think in the nine months it has been contractual plus our own diesel consumption, the extra expenditure will be more than INR 2,000 crore. It should not go diesel generation. INR 700 is for our consumption plus contractual, about INR 2,000 crore has taken place. In coming months, I don't see that it will likely to go up, but I can't make any comment on that. If our production increases, that is something different.
Diesel prices increase if it may take us further. It will impact.
Now this is this would be a good enough reason for the long-awaited price hike. What should be your view? I keep being constantly asking you the same question again and again.
I think I should do it tomorrow, yeah, Rahul. The crisis that is going on in the country, because of this, all the stakeholders are not on board. Electoral decisions are not possible in this sector.
Right. Last question from my side before I get into the queue. In terms of restocking at power plants, because obviously the demand from the power sector is high and it's continuing to be high. When do you see this restocking happening? And, you know, we read a lot in the papers that, you know, the NRS sector constantly complains. We as Coal India get higher realization selling there. Where do you see, you know, on a sustained basis, meeting the power demand and moving towards NRS also? How do you see the situation consolidating?
Rahul, first thing is we have not reduced the supply to NRS.
Sure.
That's a wrong perception being created in the market.
Right.
In a normal year, FY 2020 you take, we have given more than that. 10% more than the last FY 2020 to NRS sector. One must understand that the price of Coal India's coal is much below the market price or the imported coal price. Everybody wants that they should get this coal. I mean, by pressurizing us. It is not correct that we have reduced the supplies to NRS. The second thing is the power plant stocking. The power plant stocks at the power plant has reached 23 million tonnes. Besides that, about 8 million tonnes is there in pipeline, which is lying in the stockyards or the goods sheds.
Washers.
Wash rooms and sidings, et cetera. This coal has already been sold to the power plants. It is just because the railways, because of excessive demand, is unable to transport them to power plant point. That is easily available. At this 8 million tonne and 9 million tonne, if it reaches to the power plant, then their stock will reach to more than 30 million tonne, which will be higher than the last year. Last year we faced this. I think that in March again, we will have to give them extra coal. From up till onwards, if we are able to maintain the production level at a reduced level, but at the level of January or December also, then also there will not be any shortage of the coal.
I think the requirement of NRS, even the increased requirement of NRS, we will be able to meet.
Thank you. The next question is from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead. Mr. Murtuza, please go ahead with your question. Your line is unmuted.
Yeah. Sorry. Sir, I just have one question. You know, a lot of my questions have been.
I'm sorry to interrupt you, Mr. Murtuza. Can you speak a bit louder? We cannot hear you.
Am I more audible now?
Yes, please go ahead.
Yeah. A lot of my questions have been sort of asked. There's only one more left, sir. What is the CapEx that you've been able to do against the original guidance for, you know, up to YTD, and where you think you'll end up for the full year? Any guidance on CapEx for FY 2023?
See, for this year, we will be doing about INR 15,500 crore-INR 16,000 crore.
Yeah.
In next year also, I think we should try to complete INR 17,000 crore or go beyond that. A lot of our projects for evacuation and road construction, etc., and rail line construction are in progress. Once that constructed, we will be able to evacuate more coal. Today, the problem is not coal, but evacuation. We have to streamline for that.
Right.
Once this is done in next 2-3 years, thereafter, perhaps the CapEx will get stabilized.
Sure. This, sir, for nine months up to December, how much of this INR 15,500 have we spent?
We have spent about INR 10,500 crores.
INR 10,005. Got it. Thank you so much, sir.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.
Namaskar Pramod-ji. Firstly, sir, I take this opportunity to thank the investor presentation team for such an elaborate and exhaustive presentation, and we hope for the continuity of that same, sir. Firstly, coming to the point that as discussed earlier regarding the buyback clarification which we were awaiting from post the budget. Any update on the tax part?
Sir, secondly, as we have seen in other one private corporate where they were looking for restructuring the company because of the holding company scenario of dividend leakage and also buyback proposals, they're getting at not having the efficiency in taxation. Can Coal India could also be looked in that angle in restructuring the same, so that this holding company discounts that generally the company is getting on the bourses will get eliminated?
There are two questions. First is about buyback. We did try a lot during this budget to be incorporated, but maybe the department decided that no, it should not be done. We are taking up this matter constantly with DIPAM. Till the time that buyback structure is not changed, that the tax structure on the buyback is not changed, it will be difficult for us to go for buyback because there is a huge leakage in that. Since about 50% will go as a tax. I think that will not be considered prudent by the investors as well. I don't think there is any leakage in dividend payment, because of the holding structure, because now that tax is completely passed to.
If whatever dividend I get and I pass it to the shareholders, then we are not required to pay any tax. The third thing about restructuring. In a major way, we are not thinking of any restructuring. We may think of listing one or two small companies like CMPDI or BCCL in coming days. It depends on what type of financial strength they develop.
Right, sir. Sir, actually, sir, I was asking for the holding company discount that we are getting currently. Coal India is the holding company. It is not an entity holding the assets. These are the subsidiaries that are holding the coal mine. As we have seen in case of Vedanta, wherein they were looking to delist the company, first get it restructured and then relist again. Again, for the value creation for investors, since it is our company trading at a huge discount, that was the thought process. Second point was on the diversification part, sir. Are we looking for it into ethanol projects and flue gas as an opportunity going forward?
Also, sir, on the cost reduction exercise, post the implementation of FMCs, what kind of cost reductions and increase in efficiency, if you could quantify it for a tonne, on a basis that will flow to the P&L, going forward, that would suffice? Then I come in the queue, sir.
Coming to this methanol thing.
Ethanol.
Pardon?
Ethanol blending program, sir.
Ethanol blending we are not getting into because I have been told that there is no very established technology to convert coal to ethanol from coal. That is a very immense. There's nowhere in the world I've been told that there is any big plant existing. I don't think we can go into ethanol blending or using coal for ethanol blending. At today's rate, everything looks viable. We are thinking, and we are exploring the possibility of converting coal to ammonium nitrate. This ammonium nitrate will ensure steady supply of explosives to our company. We are looking at it, and we will be putting it to tender if found attractive and viable. Actually, the honorable Finance Minister has declared in her Budget speech also that they will be granting certain concessions for it.
With that, if it becomes viable, definitely Coal India will look into it. That will depend on its viability and rate of return, et cetera. The second question that you asked about, what was the another question?
That the flue gas opportunity for carbon capture program. Sir, I was seeking the ethanol projects from the grain-based distillery part. I think GAIL and other PSUs are participating. With the cash accruals and with the kind of returns that these ethanol plants are generating from grain-based distilleries, in terms of diversification, that was my question. Not looking for ethanol from coal. It was totally going to setting up ethanol plant and helping the government in achieving this blending program.
Frankly speaking, I've not looked into that aspect in the last six months that I was to. I just got some information a few days back that it is a very viable project and it doesn't require much of capital. The capital required and the returns are high, it is better for Coal India. Frankly speaking, I've not looked into it. Let me look into it, then perhaps we can take a call on that. Second thing, what was your another question? It's not the gas route. Delisting was.
Flue gas, sir. I was looking into the flue gas opportunity for power plant. Carbon dioxide capturing program, sir.
Flue gas, again, I have not looked into that. Nor is the carbon capture, to my understanding, is a very viable option for Coal India. This is for the thermal power station or the persons who are using the coal to look into. If suppose we get some opportunity by that it becomes very viable for us, then I will think. As of now, no.
Yes. Right, sir.
Sorry, Mr. [Kapoor].
Yeah. Yeah, I'll come in the queue, ma'am. Thank you.
Thank you. The next question is from the line of Pinakin from JP Morgan. Please go ahead.
Yeah. Thank you very much, sir. Just going back to your comment on e-auction prices, 100% premium to FSA coal prices. Just to be clear, sir, the third quarter implied FSA e-auction price was INR 1,947, which on FSA was roughly 42%. Has this INR 1,947 moved to around INR 2,500, sir? Because that is what 100% premium would imply.
In January, it has.
In January. The blended portfolio has moved to those kind of realizations in e-auction?
That's right.
Yes. Second point is that there is e-auction sales and then there is linkage auctions. If you were to roughly, you know, the FSA coal bucket was 145 million tonnes. Is that entire bucket of coal sales on fixed prices, or does it also include some kind of linkage auction? Basically trying to understand, is there scope for more coal to get transferred from the FSA coal bucket to the linkage coal bucket?
Can you repeat your question? I just missed it.
Basically, sir, other than e-auction coal sales to the non-power sector, Coal India has been auctioning coal linkages and supplying that. Sir, what is the update over there in terms of have all the non-power coal sales on contract shifted to linkage auctions, or are there more to be shifted over the coming period?
We all are based on linkage auction. It's non-power thing I'm talking about. All are on linkage basis. Some linkages were done in phase one, phase two. Today, what is going is-
Tranche V.
Tranche V. Yeah, in Tranche V, there are certain things which have expired, and we have not been able to do the tender auction for them. All those are not getting coal on linkage price. They have to take from e-auction.
So far in third quarter, what would have been that volume which got sold under linkage auction as part of that linkage auction?
I won't be able to give you that.
Sir, you will be classifying it under FSA coal or e-auction volume when you report the sales?
See, if it is so, if we sell coal through e-auction, it will be classified. If it is through linkage auction, it will be linkage auction. If the linkage auction has lapsed and they are taking it will be classified in e-auction only.
Understood, sir. Understood.
Sorry to interrupt you, Mr.
Linkage auction volume in the whole year is about 100 million tonnes.
Understood, sir. Thank you.
Thank you. The next question is from the line of Vipul Shah from Sumangal Investments. Please go ahead.
Hi, sir. Congrats for good set of numbers. Sir, my question is on your slide 11, you have mentioned that 700 million tonnes of coal projects are progressing. Over what time frame these are going to be implemented? Our capacity will be 1,600 million tonnes after all the projects are implemented?
See, the thing is 700 million tonnes, but some of the projects will outlive their life also. This 700 million tonnes, what we are saying, and the extra coal that projects will generate, it will take another 4-5 years to come in place, not less than five years. It will not go up to 1,500, but if all this coal is produced by 2030, about 1,200 tonnes or 1,300 tonnes type of coal can be produced.
Sir, you are estimating so you are executing coal evacuation infra projects worth INR 20,000 crore. I suppose these are JVs, so all this CapEx will not be done by Coal India. Some of the CapEx will be done by your JV partners. Can you quantify how much will be Coal India's contribution in the coal evacuation infra projects?
When we are saying INR 20,000 crore, it includes about INR 8,000 crore, remaining about INR 7,000 crore of FMC projects. Some of the railway lines which are to be laid in next two, three years, which will and which are financed completely by Coal India, that will be another INR 6,000 crore-INR 7,000 crore. The sidings, et cetera, which will constitute about INR 4,000 crore-INR 5,000 crore. About INR 18,000 crore-INR 19,000 crore are required to be spent from the Coal India only. This is the type of money we will be investing as our own, I mean, as equity in certain projects like CEWRL and CERL, et cetera, it will be part of the equity. Plus, which is fully funded by us. It will not be equity thing.
Not the debt or partners' money which we are talking about.
You will be compensated later?
If we move, suppose we construct the line fully like we have constructed this line, Jharsuguda-Barpali-Sardega, we get extra mileage on that. About 60% extra mileage we get, and that money should come, and that is in process, incoming. In that project alone, we are likely to get INR 200 crore per year.
Only follow-up question. Ma'am, only this is follow-up. What will be the return on this INR 20,000 crore worth of investment? I'm still failing to understand that.
Okay. For sidings and this FMC projects which constitute the major part of it, we have calculated that the money gets returned in the next 3-5 years. Because the transportation cost from mining to the point of loading gets reduced substantially. Within 4-5 years, we get the return. That type of return we are getting. For the railway projects, which are essential, we don't get much of return on that, but most of those projects are being constructed through that PPP route. In that PPP company gets a return about 12% return I think. I don't remember. 12% return we keep in that and but those projects are essential for our coal evacuation.
If we don't do that, our coal evacuation will come to standstill.
Okay, sir. Thank you. I'm coming back in the queue. Thank you.
Question is from the line of Satyan Wadhwa from Profusion Capital. Please go ahead.
Good evening, sir. My question is regarding washed coking coal. You know, for many years, since the IPO, Coal India has been talking of setting up washeries and increasing the output of washed coal. We are still only at about 2 million tonnes as of last quarter, and coking coal is highly profitable no matter what the economic scenario is. Can you shed some light on what the company is doing regarding this? Demand is only going up, so India imports almost all its coking coal. Why can Coal India not get to, like, 30, 40 million tonnes of washed coking coal a year in the next few years?
There are two types of coking washed coal. One is coking and non-coking. From your question, I understand that you are talking about coking coal only.
That's right.
Washing the coal reduces the ash percentage, but it does not improve the other properties. Indian coking coal is not of very good quality, and it cannot be used as such. It has to be blended. It can be used only for blending. What the people say and what the metallurgists say that at the best, 20% or 25% of Indian coal can be blended with the imported coal to be fed in blast furnace. Whatever the demand is, a few days back, there was a meeting with Ministry of Steel also, and they have indicated that not more than 17-18 million tonnes of Indian coking coal can be absorbed by the steel industries of India, and that too by 2030.
If we think that we can replace the coking coal, imported coking coal completely by Indian coking coal, that is not a possibility.
Right. Even to get to 15 million tonnes, by when, if Coal India has a plan, by when do you think you will get to 15 million tonnes of washed coking coal?
If all our washeries get constructed in time, with the extended timeline also, I think by 2030 we will be able to produce that much type of washed coal.
Right. Okay, non-washed coal will go up in the same proportion, three times non-washed versus one time washed coal?
I couldn't get you. Sorry. Three times or one time is what.
Currently, your total washed coal is 2 million tonnes as of last quarter, of which 75% is non-coking. Will that percentage remain the same with the washies?
The question is whether most of the coking coal or most of the capacity of washery coal is coming up between the coking coal, not the non-coking. Non-coking, there are two or three washeries existing, and one more is going to come, which may come next year. That's all. We are not constructing any more washeries.
Okay.
Sorry to interrupt you, Mr. Satyan.
All right. Thank you.
We request you to please rejoin the queue. Thank you. The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead.
Yeah. Thanks for the opportunity, sir. My basic question was on the FSA realizations. If I see the FSA realizations, they are at the, like, say, in nine years, they have increased in total absolute terms by six odd percent, if I take, like, say, nine-month average. On top of that, we are seeing significant cost increases, and we are having such a high CapEx. Like, say, I do appreciate that, in your regime, the way the aggression on the CapEx have increased, it's beyond imagination. In that perspective, sir, we are not able to take a price hike, and that is also like, say, in last four years, we have not took the price hike.
On the working side, like, say, what price increase we are factoring in or we are asking to the ministry, because that is the only authority which is going to allow you to increase prices.
First thing, the pressure price has not gone down in this quarter. I think it has gone up a bit.
No, no, sir. I am saying that over nine years, like, say, if I see the realizations in FY 2013, it was INR 1,300, and we have in nine months at roughly around INR 1,380. It's a total increase of 6%.
Yeah, that's right.
And-
In the last four years, we have not increased the price. That is a known fact.
Yeah.
We are trying our best to bring all the stakeholders on board, and the price rise has become imminent. There is no question about it. We are working on that, and I've been working very hard for last one year or so. I think now it should happen. When will it happen? It is difficult for me to commit. CapEx is required, without which we cannot increase our production and dispatch. See, second thing you must understand, that in Coal India, most of the expenditure is committed expenditure. Whatever extra we do gives us lot of returns. Like this quarter, we did slightly extra production, extra dispatch, and the returns have been very phenomenal. Second thing, in other areas, in non-FSA, this non-FSA area and in this, we get auction price.
We are trying to increase those volumes. Unfortunately, this year, because of the price of imported coal being very high, the imported coal-based power plants have shut down, and we had to cover that up.
22 million to 300.
We have to supply something like 20-25 million tonnes for that. In that situation, increasing the volume became difficult. In coming months, with our increasing production, I think we will be able to increase our volumes in e-auction, and that itself can give lot of return to us. I'm not worried about return per se, but I'm really worried about price increase, and we must do that. That I understand.
Sir, lastly, on the, like, going back to the beneficiated coal. Like in FY 2007 we were doing 14 million tonnes, and now we are doing 10 million tonnes. The whole claim that we are going to put up 10, 20-odd new washeries. Even over like say around, like say, almost like 13 years, our volumes have gone down from 14 - 10 million tonnes. What's the view on that part? Are they on a no-go mode or they have been stopped, or what is happening on that part, sir?
See, there were certain issues, regulatory, some legal issues, et cetera, in constructing the washeries. Because of which three washeries which we had issued LOA, we could not start. There is one washery we have started last year, Patherdih, Madhuban. No, Patherdih. The second washery, Madhuban, we'll start there maybe just next 15 - 20 days. That is started and
Dahibari.
Dahibari. Can I miss it?
Dahibari.
Dahibari has been started. We are trying to complete this there. In CCL, there is some issue of using CBA land for non-coal purpose. For that, the decision our government has almost taken, and I think it should be taken, I mean, now, and very soon. Once that is done, these washeries can be constructed. This is one aspect in which definitely CIL has failed to deliver on what they had promised.
Thanks a lot, sir.
Thank you. The next question is from the line of Mohit from DAM Capital. Please go ahead.
Hello. Good evening, sir, and congratulations on good set of numbers. What is the status of our solar PLI bids? Is there any update which you can share?
We were out of list when it was only whatever they had declared INR 4,500 crores or such. Now we are in the list, and once it is clarified and whatever they have declared in the budget, we should get that thing. We are looking for partner. As I told earlier, that Coal India will not establish on its own. It will look for some partner and construct a joint venture. If we get that, then only we'll go ahead with that.
Secondly, on MDO tenders, sir, how has been your experience with the MDO tenders, and how many blocks do you expect to bid out in FY 2023?
We have already done two. The third, Chandragupta, again, has been bid out and LOA has been issued. For that, maybe the agreement or work order will be issued very soon. Subhadra and Garipalma and another one, Mahanagar. These three are, their financial offers have been opened and they are being evaluated. I hope out of these three, at least one or two will be awarded. We are working, but these, all these are very huge mines. They may look four, five mines, but then Siarmal itself is 50 million tonnes. Kotra Pattan two is about 5 million tonnes. And that, Chandragupta is about 20 million tonnes. So volume-wise, they are very huge. All these mines once auctioned out, means even if this four, five is done, it will be in the range of 100 million tonnes.
Lastly, sir, what is the status of coal gasification project? Will we go, will we start, will you do something in the near term, medium term, tender out some large, you know, tenders? Given the fact that there's a national coal gasification policy in place, how do you see over a medium term, you know?
See, we are not implementing this in EPC mode. We are trying to implement in BOO mode. Dankuni tender was out, but there are certain complexities because of which it is taking time. I don't know what will happen to that tender. Rest of the two tenders have been issued. We are waiting also for the government's clarifications about what type of subsidy they are going to provide or what type of support they are going to provide. Once it becomes clear, then the viability can be established, and then perhaps it will be possible to move forward and define the timeline.
Which are the two tenders?
One is CCL and.
CCL and SCCL?
CCL and SCCL.
Okay, sir. Thank you and all the best, sir. Thank you.
Thank you. The next question is from the line of Raashi Chopra from Citigroup. Please go ahead.
Thank you. What is the cash on your books, net cash on your books as of December?
As of January end, I know it is over INR 30,000 crore. As of December end it was INR 27,000 crore?
INR 28,000 crore.
INR 28,000 crore. Hello?
Yes. Okay. Got that. Thank you. Second thing is on the e-auction prices, you mentioned that the premium was 100% in January. Is that still persisting through February as well?
February, I don't have report right now, but Director Marketing, request if he has got some figure, he will tell you. In January, we did got 103 million, 103% thing, and that was about 48 million tonne coal or-
Just, uh-
12 million tonne coal. In February, do you have data?
Uh
No, no, I've not finalized it, but it will be more than 12 million tonnes.
In February, he's saying it will be more than 12 million tonnes, and the rate will be in the same range.
Same range.
Okay. Do you anticipate that the situation at the power plants, in terms of the inventory gets better in the course of the next few months?
It is getting better. There's no doubt it will get better because there is 23 million tonnes already there in powerhouses, and 8 million tonnes, as I mentioned, is there in pipeline. It is not just extra coal that is lying in the goods sheds and washers, etc., of powerhouses. So we have already sold that coal. Once it reaches there, it will become 31-32 million tonnes, and the accretion is taking place every day. I hope in April, May, June again, our production will remain good. In that situation, there should not be any shortage of coal in powerhouses this year.
Got it. Okay, just one last question from me. You said that you had a meeting for the wage negotiation yesterday. What is the ask from the unions at the moment?
At the initial stage, the asks are like sky. They're asking for 50% increase in everything. Those asks have got no meaning.
Okay. Got it. Okay. Thank you so much. That's all from me.
Thank you. The next question is from the line of Hemal, an individual investor. Please go ahead.
Sir, thank you for the question. Just very quickly, what is the cash on the books as of December 31st and the debt that we have?
There's hardly any debt. Cash is about INR 28,000 crore.
INR 28,000 crore.
INR 28,000 crore.
Okay.
We have removed all the short-term borrowing. There is a long-term borrowing which gets reflected because of those railway projects of the CERL and CEWRL. It's about INR 3,500 crore.
Sure. Just one final question, the rest is all answered, is in case we are gonna continue with our INR 16,000 crore-INR 17,000 crore CapEx next year, and if the price rises don't happen, the wages do have to increase as per your negotiations. Do the initial CapEx still continue, and you'll borrow for the same? Or, how do you. Or is it a capital allocation where CapEx gets the front-end investment over the dividend policy? How does it work in your mind? If you can shed some light on it.
Giving any commitment about future will be difficult. What I think, there's no reason that prices will not increase. Prices will have to be increased, otherwise, coal production in the country will get suffered. Some of my subsidiaries are also already filling the tranche, and hence that will happen. In a hypothetical situation, nothing happens, then, we are a zero-debt company, and we can leverage our balance sheet very easily at a very low cost. That is not a bad option. We will do that.
Okay. Thank you, sir. Appreciate it.
Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead.
Yeah, thanks for taking my question, Pramod. I have just two questions. The first one is on incentives. Earlier, we used to get incentives in fourth quarter. But you know, last year we forgot it because of COVID situation. This year, do we, I mean, how much incentive can we expect in fourth quarter? That is the first question.
It's not there. After that, we had waived their PI. That is, I think you are asking about performance incentive because no other incentive is there in Coal India. That is there till March. That waiver was given till March, and after March we are going to re-implement. That's there.
Okay. One more bookkeeping question. What was the cash flow from operations for the nine months FY 2022?
Cash flow from operations. I won't be able to tell you right now.
Around INR 16,000 crore.
About INR 16,000 crore.
Yes. Yes. Okay. INR 16,000 crores. Okay.
I will send you this answer. Okay?
Okay, great. Great. Thanks, and all the best.
Thank you. The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead.
Thank you, sir. Just quick two questions. One on the employee cost. How is the attrition rate panning out as we speak? Given the attrition and post the wage hike that has to happen, you see normalization of the employee cost and that not increasing going forward? That is first. Second question is, sir, regarding the 3,000-MW solar project that you're planning to do. Sir, any update on that please? Thank you so much.
First thing, attrition of the employees, that is going as we had predicted because there is no production involved in that, because the retirement age is one thing which is fixed. It is not decided by God, it is decided by man. After wage hike, attrition will take place, will continue. Because of certain provisioning this year, we have seen slight increase in our employee cost. But in coming years, it is likely to reduce further because we had not provided earlier for the CPRMSE, means Post Retirement Medical Benefit for non-executive. Secondly, there was some provisioning to be made for gratuity also. Because of that, we had to make some provisioning this year and last year as well, last quarter of the last year as well. There is some of this.
I won't be able to say that this reduction in manpower will be adequate to compensate completely for the wage hike that is likely to take place. That wage hike will not significantly impact on the company. That much I'm quite sure.
Right, sir. Thank you. Last, sir, on the 3000 MW of-
The 3,000-MW thing, we have already placed order for 190 MW. 90 MW is in pipeline, which the order can be made very soon. Another 150 MW is in pipeline. We were bidding for this from whatever market we are getting. Except for 100 MW, rest of the thing is for our internal consumption. We were bidding in whatever discounts were coming forward and trying to get that. Unfortunately, the market has been fluctuating and the taxes, et cetera, have increased substantially. We have not been able to. We have not been very successful in that. Now we are planning that we can have solar power plants in our own land, which is lying vacant. Perhaps with that, the cost of generation will come down and we can bid.
That we are planning.
Great, sir. Thank you and all the best. Thank you very much, sir.
Thank you.
Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.
Vanakkam, sir. Sir, coming to the point of the staff cost, what is the attrition part? Today's employee strength, the exact number, what is the reduction we are expecting for this year and for the next financial year in the absolute number terms?
The net attrition reduction in the manpower is in the range of 14,000-15,000 . This year again, it will happen, and next year again, that will happen.
Right. Sir, on the setup of this employee cost, looking at the size, the projects we are contemplating and the way the production is ramping up, sir, being a government organization, sir, is this going to be the employee cost structure permanently, that a fair share of the revenues goes towards the payment of employee costs. We can understand the social obligation, the duty and government being the owner, but then you are also in the competitive space, and you have your minority shareholders to whom you are also accountable, if my point is correct, sir. Sir, in that case, the ratio of employee costs to the total revenue it stands slightly unexplained in that sense.
If you could explain to us going forward, is this the same ratio we're going to be? Because sir, as you have told, they'll ask it 50%. And as and when we go for an increase in the selling price, they would be putting pressure again for revision or in that correlation. What is the thought process, and how is this cost going to plan out, say from today at INR 630 - INR 1 billion and then above, over and above that? If you could explain.
Saket, the employee cost has remained fairly constant in absolute terms over the last 4-5 years. If you see the number, it has remained almost constant. There might have been an increase 1% or 2%, 3% or something like that, but the employee cost has not increased despite an increase in DA, despite an increase in their increment that takes place every year. If we increase the volume, that employee cost is not going to increase in the same proportion. Today, we are getting more than 70% of our production through outsource mode. We are not dependent completely on our permanent employee to increase the production, nor are we planning to induct more manpower just to increase the production. That again, we are not doing.
There is no reason why the employee cost percentage in the total expenditure should not reduce in coming years. It will come down substantially over the years. Our employees strength will stabilize somewhere near INR 1 lakh or something after maybe 6-7 years. That is the thing that is likely to happen. In long term, employee cost is going to reduce. Whatever CapEx that we are doing is not requiring extra manpower. If we are constructing FMC, et cetera, they are being maintained by the contractor in the initial 4-5 period, and thereafter, we are outsourcing the maintenance part and operation part to the private sector. There also we are not increasing extra manpower. Slowly, the cost of the employee as a percentage of the turnover is likely to reduce substantially.
Sir, what is the key reason for such kind of valuations we are commanding? Sir, if you look at your presentation, I'm just putting the thrust again, sir.
That is an enigma to me also, why the share market is not. Maybe this is because it is an energy. People are not liking the fossil energy company all over the world. Fossil energies are being valued at much lower. Secondly, maybe because it is a government company, and sometimes government take steps which are not appreciated by the stakeholders. So the shareholders. Because of these reasons, perhaps we are undervalued.
Sir, if I may-
Sir, just two minutes.
Yeah. Ma'am, if I could make my follow-up and then conclude, ma'am, with permission of please Chairman.
Please go ahead.
Sir, first on the restructuring part, sir. When we look at the structure for Coal India, it is all the subsidiaries and Coal India is the holding company. Correct me there, sir. Is that could be a reason that a holding company discount is prevailing sharply over the market capitalization? We should contemplate things like what Vedanta was looking forward just to get it first delisted and then again relisted. Yes, sir.
Saket, on this topic, we can discuss why Vedanta was doing and why not, and we should do. These are not something we can discuss openly, and you know much better than me.
Uh-huh.
Why Vedanta was doing, why it was undervaluing the market, why it was trying to sell it at much lower price? These are known facts, sir. Secondly, I told you it's not just because of that. Why NMDC is being valued so low?
Mm.
These are the considerations which we have to back. We can discuss this thing sometime offline.
Definitely. Yes.
Someday we can discuss it.
Sir, I'm in Kolkata, sir. I will come down.
Fix a time and, sir, come down.
Yes, sir. I will do that, sir. Thank you for the gesture, sir. Thank you.
Thank you. The next question is from the line of Faisal Hawa from H.G. Hawa & Co. Please go ahead.
Sir, will we continue to outsource our contracts, like we did to Power Mech, et cetera, and, you know, keep on reducing our staff on the rolls? Will this accelerate like anything now, or, you know, we will continue with our own staff further up?
I couldn't get your point, means. Can you repeat the first sentence?
Sir, can you hear me now?
Yeah. That's right. Yeah.
Yeah, my question is that we have been, you know, outsourcing most of our extraction and, you know, other contracts to third-party contractors like Power Mech Projects, et cetera. Will this continue as a trend where we will try to reduce our employees on the books?
See, our employees are reducing. I'm not planning to increase it substantially. The extra production has to come through outsourcing. That is the plan of the company.
Why are we not issuing more tenders for the same in other mines also?
We are issuing a tender. There are not many tenders.
Okay.
You see number of tenders were finalized for the last year. We have created extra capacity of excavation and transportation.
Okay. What could be the savings in terms of crores of rupees if taken over a period then?
See, giving numbers, et cetera, to such a thing will be difficult. At about 75,000 people are producing about 70,000 coal. 70% of our production and about rest of the manpower is producing 30%. I don't have right now, but we have got those figures. What is the cost per tonne from the departmental labor and from the outsourced labor? Do we have that?
No.
Can we calculate that?
Uh.
I can get it calculated and then send it.
Uh-huh.
I don't have it right now.
No problem, sir. Sir, I mean, efficiency-wise, you feel that the third party operators labor is much more efficient than ours? That's for sure.
Let's talk in all these things offline.
Okay. I must admit that, you know, you have given a very candid con call all through, and within the you know government's constraints that you have guided the investors very well.
Thank you. Thank you.
Yeah.
Thank you. The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead.
Yes. Sir, any update on the aluminum project?
Yeah. We are working hard for that. We have got approvals, et cetera, from Odisha government. We have requested them to give us a mine on a nomination basis. Once that is allotted, then we'll go ahead with it. It is a time-taking process, but to my understanding, every stage of aluminum is a profit-making venture. We can sell bauxite and make profit, we can sell alumina and make profit, and we can make aluminum and profit. I think this is one project on which we are seriously working. Whether we succeed or not, that is a different question.
I believe that DPR and all has been made, sir. How much?
DPR has been made. Including powerhouse, it will cost something like INR 26,000 crore-INR 27,000 crore. It will be based on liberal thing, and we are not going to invest everything as we do in generally our own projects.
Okay. How much, like, say, share or equity would be there?
We are planning that we should hold the majority stake because otherwise on nomination basis, getting the bauxite mine is not possible. We are working on that line, but it will depend when the partner is inducted that what he wants.
Okay. Lastly, sir, your other expenses has increased a lot, sir. Like it's an increase of roughly around, if I see, 18.5% year-over-year, while our production has increased almost like say 4.5%. What's the reason for that?
Other expenditures, sir?
Sorry, miscellaneous expenditure which you talked about.
One thing is that environmental and tree plantation has increased. Hire charges have increased. I won't be able to give you the details why it has increased. Maybe I'll request the Director of Finance. I mean, we don't have Director of Finance right now, the CFO, to send it to you separately.
Okay. Thank you.
Any more question or.
Thank you. We do have a question from the line of Vipul Shah from Sumangal Investments. Please go ahead.
Hi, sir. What will be your employee strength 3-4 years down the line?
I think we should reduce 14,000-15,000 per year. That is the likely reduction. This year we are likely to close at 245,000. Whatever time period you keep in mind, you will keep on reducing by 14,500.
Means that would result in cost as a percentage of revenue, the employee cost? Any ballpark figures, sir?
In general, if you don't take into account the events like pricing, this wage negotiation, et cetera, or any other increase that suddenly takes place, like DA was increased by Central Government, then it will remain almost constant.
It will not get reduced.
It...
It will be marginally.
Marginal reduction may take place here and there because there is an increase of about 3% every year due to increments. There is further increase of 1% or 2% because of the promotions, et cetera. 1% you can take on average. Then the DA thing gets compensated. As a percentage, in real terms it will not, I mean in real terms it will get reduced, but in absolute terms, in that numerical sense, I don't think there will be serious reduction in that.
Sir, lastly, regarding this fertilizer project, what will be our investment and when is it likely to be operational?
There are two sets of fertilizer projects. One is HURL and one is TFL. In HURL, the total expenditure is around INR 16,000 crore. Our share is about 33% of that means about INR 1,400 crore-INR 1,300 crore. In TFL, again, the total expenditure is about INR 13,000 crore and our share is about INR 1,300 crore. That is the total CapEx that is likely to take place. One thing
But we will-
Say that the CapEx has taken place this much. This also includes the proportional investment that we are making in HURL and TFL and taking loan there. In absolute, outward terms, this INR 15,000 crore will not take place in actual terms.
Okay, sir. Thank you and all the best. Sir, I have many questions regarding your employee cost, but you will not be able, comfortable discussing this. You have suggested we can take it offline. Whom should I contact for your time for these questions?
You consult Company Secretary, Mr. Vishwanath, and he will arrange the thing.
Thank you very much, sir, and all the best for the future.
Thank you. The next question is from the line of Ashish Kejriwal from Centrum Broking. Please go ahead.
Yeah, hi. Thanks for the opportunity. Two questions from my side. One is on e-auction volume. When you spoke about January -February, which is around 100% premium, so when will it start hitting our P&L?
Next quarter, because actual lifting will start in about 30-35 days.
As of now, if I look at in fourth quarter, actual thing will start, which we have already booked in November, December type.
Yeah, that will start getting reflected in the fourth quarter.
What was that percentage, sir? Is it more than 45%?
Definitely. On the average this year we have got something like 60%.
It's more than that.
More than 60%.
We have 60% around, but then it's okay.
It's more than 60%. Till December also it was more than 60%, 70%.
Okay. In terms of volume, you're saying that, you know, fourth quarter e-auction volume, which will be reported in P&L, will be higher than what we reported in fourth quarter last year. That's right?
It will be reflected.
He's talking about in terms of lifting. Because if the lifting takes place, it gets reflected in the P&L.
Okay, lifting.
Last year it was 29 million tonnes, sir, in fourth quarter.
Yeah.
Few much higher than that. We are expecting slightly more than that.
Okay, that's it. Sir, secondly, on employee cost, obviously you must be making some increase in that and taking provision for that. What was the rate at which we are making provisions in our employee cost as of now?
What we are making right now is about INR 100 crores per year, per month.
I'm talking about, like, you know, their initial ask was 15% increase. Is it possible to quantify what percentage increase we are taking into account while making provisions?
No, I won't discuss that thing.
No issues.
It'll affect our negotiations.
Yeah. Thank you, sir, and all the best. Really you are doing pretty well.
Thank you, sir.
Just, we are waiting for the ultimate thing which you also are waiting for me.
That's right.
Thank you.
Thank you, Kamlesh.
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Vishal Chandak for closing comments.
Thank you everyone for joining this call and thank you very much, sir. I think this was a very, very candid conference call that we had had for a very long time. I'm sure investors will appreciate that. I would hand over the floor to you for your closing remarks. Over to you.
Thank you, Vishal. Thank you, everyone for being so patiently hearing for me. Sometimes I become slightly longest, but then to explain the things one has to put some words on that. Thank you very much for hearing me so patiently. Thank you. I would like to meet you people physically. Maybe soon we will be able to travel to Bombay. Thank you very much.
Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.