Q3 20/21

Feb 11, 2021

We are very pleased and honored to host Mr. Pramod Agrawal, Chairman and Managing Director of Coal India Limited for an investor call post the Q3 FY 2021 results and also to discuss his views on the recovery of coal demand in India. Along with him, we have Mr. Sanjeev Soni, Director of Finance Company Executive, Mr. Vishwanathan and other Head of Departments. On behalf of ICICI Securities, I thank you all for joining this call. Over to you, sir, for initial remarks and then we can have a Q and A. Thank you and over to you, sir. Thank you, Rahul. Thank you all for attending this phone call. As you know that Post COVID, things are improving. The demand for energy is increasing. And in the last 2, 3 months, this is November, December and January, The energy generated through thermal power stations means coal based energy has increased by about 8%, But unfortunately, that is not getting reflected in our offtake, mainly because all the power plants who are having very high stock of about 30, 34 days. They have now reduced it to 18 days means in tonnage terms, it was In July, the total highest stock was 51,000,000 tonne at the power station, which has now come down to 34,000,000 tonne. We have tried our best to compensate this by increasing our offtake in non regulated sectors. We have increased The amount that was offered in non regulated sector and we have almost increased it by 60%, 70% in the sense that last year, since January end, the total quantity booked under an RAS in key auction was about 60,000,000 tonnes, which has now increased to 92,000,000 tonnes. This gives us comfort that In this year, against the last year's complete booking of about 68,000,000 tonne, we will be doing a booking of about 120,000,000 tonne. But our 80% demand our 80% supply takes place to 30 power stations and only 20%, 25% expressed to other factors. So this 20%, 25% cannot compensate the loss that is happening in the power sector. The loss that has happened in the Q1 could not be compensated completely till now, but I am quite hopeful that the way the demand is increasing and the way The stocks have depleted because now 18 days stock is only available in the power station and they are mandated to keep 19 days demand. So now the offtake must increase and post from March onwards, it will be the supply constraints, which will which can affect the supply rather than demand. We are quite hopeful that the way the country is developing, we will be able to meet all the demand. There will be quite a good demand for our coal. International prices do arise in and so we are hopeful that even in auctions etcetera, we should get a Good return. In the 1st 3, 4 months, there was hardly any premium we were getting, but last month, the average premium was 25%. Till now, on the average, we have got a premium of 16%. We can say that this is a loss compared to the last year because the last year, the premium was 40%. But in the current scenario, the most important thing is to keep the coal going so that the production can be Production speed of production can be maintained. So that is the most important criteria and which we are trying to follow. This year is a tough period. We hope that COVID is now behind us and coming months will be better. Thank you. Thank you, Rahul. Are you online? Yes, sir. Malika, can you start the Q and A please? Thank you very much. We will now begin the question and answer session. The first question is from the line of Amit Dixit from Edelweiss. Please go ahead. Thanks for the opportunity, sir. I have two questions. The first one is on FSR realization, which is down QoQ. Any specific reason for that? Assess a realization, if you are talking in the per ton basis or you are talking in terms of quantity? No, for a certain basis, right? That's basically because we have not taken any performance incentive this year. And we are not imposing penalty because of soft lifting, because of COVID the forced major conditions to weather and it continued to lift. But Because of these 2, the realization is slightly down as a serialization. But in Q2, The realization was like INR 14, INR 12 per ton. And in Q3, it is down to INR 1354. So I thought that you would be foregoing your performance incentive and not in terms of penalty in Q2 also. So my question is why it is down Q3 specifically? I won't be able to reply this specific question Because maybe because the mix of the call it quantity Of the coal is different than this quarter than the last quarter, but then on average, it should have met. I'll have to check and I'll give you reply separately. Okay, sir. The second question is on receivable, if you can let us So what is the receivable at the end of December and if possible, can we? Receivables are almost constant. They are in the range of 21,500 And this December numbers were 21,234. In September also, it was in the same range of 1,500, now also in January and it is in the same range of 21,600. So whatever we are selling now we are getting the money, But whatever is backlog, it is we are finding it slightly difficult to recover that. Okay, sir. I have other questions. I will get back in the queue. Thanks and all the best. Thank you. The next Question is from the line of Rahul Jain from Systematics. Please go ahead. Yes. Hi. Thanks for taking my question. So my first is on there is a notification from the Ministry of Mines where they are saying that mines which have been allocated post 2015, There will be additional royalty on that and the Ministry of Coal has to submit its recommendation on that. So what do you think would be the liability? And What is the breakup of our mines, which were allocated pre-twenty 15 and post-twenty 15? Most of our mines are allocated before 2015. After 2015, hardly 1 or 2 mines have been allotted. And some of the mines are given as custodian for mines, so those mines are being No, Akshan. But all these mines were something that's given to us and I don't understand know Of anything in which they are going to impose any extra royalty on any of our mines. Right, right, right. Okay, fine. So you're saying that you don't have any liability which will come out of the range? No, to my knowledge, there is no such liability as of now. Okay, okay, sir. And sir, in terms of your new ventures, which you're talking about like solar chips and among the other things, what is the kind of capital allocation that have thought about? In most of the diversification projects which we are thinking or we are exploring, We are not going to take any technologies or so too much of capital risk. What we are proposing that we will That we will form an SPV, get all the clearances and offer this to some partner who can come along with this technology and who can invest most of the money. So from the side of Coal India, the capital investment will be very minimal in the sense that we will acquire brands And maybe provide the infrastructure beyond that we are not going to do much. So you've not pumped up any numbers on any of these measures so far, right? On Coal India side, we have given some numbers, but those numbers are very small. Right. For it in a 5 year project, there may be about INR 400 crores, INR 500 crores that can be or something in that range. The rest of the money should come from the partner. Right, right. And so lastly, we have this renegotiation coming up this year. Have you thought of any possibility of price increase around that? Or is it like because you will have some pressure from your competitors like solar is also doing very well and things like that, that we may not have a price increase, any thoughts around that? We are thinking and it will come very soon, but it will be very difficult for me to give any date for that. But definitely, we will compensate we will more than compensate what we will give as a wage increase. Okay, sir. Thank you. Thank you so much. Thank you. The next question is from the line of Ashish Kejriwal from Sam Capital. Please go ahead. Yes. Hi. Good evening, everyone. So two questions. One is on debtors, you said INR 21,500 crores. But what we remember was at the end of Q2, it was INR 23,300 crores. So is there anything net or gross amount in that? And Secondly, we were expecting this to get some money out from after Diwali, but still we are not getting it. So any course of action on that? See, I don't the 3,500 might have been dropped. What I'm saying today is net amount, net of everything. So in To my knowledge, in October, November and to December, this was only 21,500 and in September and also 21,253. So it is range bound in that only. Yes, we were expecting that increase after the Diwali, but unfortunately the listings are not what I was expecting in December. Actually, the listing was Less than last year, because in November, October, September and all those months was much more than am I online? Am I audible? Yes, yes, sir. This is your audible. I'm from Beep, so I thought I want to connect it. So I was expecting that same Trend will continue in December January, but unfortunately, the lifting was not so good because all the power plants are reducing their stock instead of taking coal from us. So we have missed that time, but now the as the demand is increasing from the coal based energy and I have said that In normal December, January all the 3 months, the increase is in the range of 8%. So now we are putting pressure on all our consumers to make the payment. Maybe till March end we won't be in a very strong position, but from April onwards when the demand will further increase, definitely we'll put all the pressure. So sir, in case you are not getting it till March, then our free cash flow will be very low. And then is there a possibility of any incremental dividend on it because all the money is stuck with the debtors? It is not all the money stuff is the better. I had promised that this year, the dividend will be in the same range that the last year. So for this year, I should not say much beyond this, but then there will be another interim dividend and then final dividend. So We will be giving dividend continuously at regular intervals. Sure. And so, secondly, on FSA realization, are we seeing any shift in customer percent like now Customers who have bought on a linkage coal auction at a higher premium and now they are getting it at a lower price in the e auctions. So have you seen some kind of shift in that customers? And because of that fact, our effective realization was low on a while basis? Some customers have shifted out, but that total quantity out of that shifting is not very significant. It's either I won't 5,000,000 or 7,000,000 ton in that range. So that is not something very significant. But We are not going for a tranche fight as of now. So this is putting a lot of pressure on the customers and they are not now getting off not yet bidding assets. Okay, fair enough. Thank you and all of it. Thank you. The next question is from the line of Rashi Chopra from Citigroup. Please go ahead. Sir, only CapEx, what is the is this going to be are you on track for 13,000 This year, INR 13,000 crores this year and what should we expect for next year? This year, we are targeting for INR 13,000 crores. Next year, it will be INR 16,000 crores or INR 17,000 crores. But all this CapEx are on development of our evacuation system on this so that Major constraint that we are facing is basically that how to evacuate the coal. As I had mentioned earlier also, we are And mechanizing lot of our mines in the sense that evacuation system evacuation which is taking place from the trucks, etcetera, will be done through CHF Coal Handling Plant and directly loaded to the WAGM. So a lot of money will be spent on those things and perhaps inducting some high grade machines so that production productivity can be increased. I'm sorry to interrupt, ma'am, your voice is breaking. I would request you to move to a better reception area. And then how much is spent until January, how much CapEx? Through January, we have spent something like INR 9,300 crores. Okay. So just a bookkeeping question, what was the dispatch, the total dispatch total 9% in the quarter, What was the breakdown between power and the non power sector in terms of growth or volumes? In the last quarter. Rashi, can I give you this reply separately, but 9% is overall And I think 20% was in NRS and almost 7% in Power, but these are By my just going by my memory, but then okay, just a minute? 50% is in sorry, I won't be able to give you right now. I will supply you separately. Okay, okay. No problem. And you said that the e auction premium in the last month was 25%, did I get that right? 25% is the premium. Okay. All right. Thank you, sir. Thank you. The next question is from the line of Indrajit Agrawal from CLSA. Please go ahead. Hi, thank you for the opportunity. A couple of questions. One is more on a medium term side with the government auctioning so many mines on the commercial coal mining sector and also giving so many incentives. How do you see Demand for our coal, particularly on the e auction side, say 2, 3, 4 years from now? In next 2, 3, 4 years, these mines will be hardly producing anything. The total auctioned amount quantity, the PRC, the Peak rated capacity of all these mines is around 50,000,000 tonnes. So that amount that quantity is not so significant that it can affect. And in next 2, 3 years, nothing is going to come out of those mines because they have to take all the clearances and then they have to start a reason which takes a lot of time. In the mining business, 3 and 1 cannot start any mine within 3 years. So I don't think that in the medium range there is going to be any challenge. Actually, what is the challenge is to increase the evacuation from our mines. If we are we can successfully evacuate our coal from the mines, then there will not be any challenge. Sure. That's helpful. My second question is on the closing down of underground mines. Any progress on that? What is the kind of savings you can look for? And When will that reflect in our numbers? Yes. Last time, I had said that we will be closing down 23 miles Upgrading their production in this mine. They have already closed down 11 mines. 5 mines will get closed by 31st March. They are promised to The 7 miles, so they are planning to upgrade if they are able to upgrade them and increase the production substantially, we will continue that, Otherwise, we'll close them down again. And what is the kind of cost savings that can happen from these 16 minutees that we have closed down so far? In 15 months, we should do a saving of about INR 300 to INR 400 crores. Sure. Thank you. I have more questions. I'll jump back to you. Thank you. The next question is from the line of Pinakin Parekh from JPMorgan. Please go ahead. Yes. Thank you very much, sir. I have two questions. My first question is that if you look at provisions, they have again increased Sharply on a Q on Q basis to INR 500 crores. And in the last two quarters, the provisions of nearly INR 850 crores is more than 7 times of what was In the entire F 2020, so what do these provisions relate to and what's the outlook for this? And my second question, sir, relates So dividend, there was a comment by in the government quarters that state owned companies should now look to give quarterly dividends. What is the company's view on this? Because quarterly dividends will also be welcomed by all sets of investors because that will just give more Stability and visibility to their cash flows in terms of dividends, sir. See, the first question About the provisioning, yes, the provisioning that is basically of the done dues which were not recovered and 3 years All deals have to be provisioned in our balances. That's why they have been provisioned. But most of these provisioning will get back because these are the From government. So these firms are really in crisis at this point of time, but then most of it will be recovered. These These are not something from the private sector or something. So there should not be any problem on this account. Next year onwards, when we regulate start regulating the Supplies, perhaps we will be able to get all this due. 2nd thing is your quarterly dividend. The government has said that there should be more frequent dividend payout, not that once in yearly type of payout. We have already paid dividend once. We expect that another pension dividend we should be in position to pay and thereafter a final dividend at the time of So the final basis, sir. So I won't say that we will be paying every quarter, but at least twice or thrice a year we will definitely try. Thank you. So just to clarify, while you mentioned that the dues are from the government entities and hence they will eventually be paid, Would it be fair to assume that once we enter April 21, many of this 21,000 crore existing receivables From an accounting perspective would have to be provided for if they are not paid fully because yes, from a cash flow perspective, they will eventually come. But are we looking at possibility that from an accounting perspective, provisions sharply rise over the next 1 to 2 quarters? No, no. Because about a year back, the total this outstanding was only INR 6,000 to INR 7,000 crores. These outstandings have increased in this year only in 1 year, last 1 year or maybe 12, 13 months or 14, 15 months. And if it becomes 3 year old only, then the provision has to be made. So I don't expect that this provision is going to be Understood. Thank you very much, sir. Thank you. The next question is from the line of Kamlesh from Prabhudhas Liladhar. Please go ahead. Yes. Thanks for the opportunity, sir. One question on the part of capital allocation. First, I mean, again, All the news force continues to come. Like we are partnering with the Nalco to invest You are not your voice is not very clear. Can you I was asking the question that some of the other deals coming from the front office capital allocation Like we are partnering with Nalco for investment in smelting capacities, then this SPV for solar wafer and all that. So like can we have like broadly some capital allocation policy going forward, though it's very appreciated that We are investing heavily on our transportation side, but all these other investments, what is the broad policy on that front? See, most of as I mentioned earlier also that most of the things like the new ventures like the Coal or buffer or anything that will be mostly in the sense that or even full gratification, we are looking for a partner who can come and invest their capital and maybe we can share the equity in the sense that the technical this technical risk and capital risk will have to be taken by him. And all these are being floated in the tender will be floated in a way That only if we find it profitable and IRR is quite return is good done only and a long term commitment is made by the government for purchase and to On supply side, not only we will enter into this. So the and as I mentioned earlier also, that capital investment Maybe in if we go ahead with this aluminum smelter plant, which in which case, Nalco has bought Almuna, which is one of the cheapest in the world and they are we may partner there. So otherwise, the capital allocation will be very less. Okay. And sir, lastly, like in last quarter, we were very confident that we would be able to grow our dispatches or offtake. But like even in the last quarter, we benefited primarily because of the weak base, like volumes were down in last year, like October 2019 to December 2019 by roughly around 20 percent odd and on that to peak base, we were able to show growth and our volumes are at the same level that it was around 2.5 years or 3 years back. So now we are saying that there is invented destocking at the coal at the power plant. But this theme has been there for the last 4, 5 years and we are not able to push volumes or grow volumes Despite the fact that there has been heavy increases in all alternate fuels like say beet, pet coke or the imported coal, But we are not able to take any benefit out of that by pushing volumes. So really surprised to know on that particular front. But even in the January, our dispatches are down 5%, February, it's again down 3% to 4% and the base are not that significantly, it's hardly 6% base last year. I mean, I Last year. I couldn't get your point with the last sentence, hardly. Like even last year, we had the base Growth in the last year was 6%, given on those reasonable days where our volumes are in decline territory. You are right that the growth has not been seen in December January. December still there was a positive thing. But in January, there was a reduction in Showed reduction in what we did from the last year, but we must compare this situation with the what the overall thing that is happening in the economy. If economic degrowth is about 7% to 8% and about 10% and it would have otherwise grown by 5% to So the difference is about 16% to 17% net and that is in the real term. So if that is the situation, it will be rather difficult. The only option for us was to capture the MRS sector and to go heavily on the eAuction thing. And we have gone very heavily on that. We have already booked about 92,000,000 tonnes. This coal is getting listed. So But the reduction that has taken place in energy sector cannot be easily compensated through NRS sector. NRS has become completely dependent on Imported Coal. We have to give some confidence that whenever they require the adequate quantity will be Offer to them. That is something we are trying to do. And once we are successful, we will definitely if power plants have reduced their The consumption can be indicated from the fact that the power plants have reduced the stock by 14,000,000, 15,000,000 tonnes. The total stock now is 18 days where stock is there with the power plant. They cannot go it for They cannot reduce it further because the CEA mandates that 19 days of stock has to be maintained by them. So I'm quite hopeful and I've got reason for that Because 18 days of stock is not something which they should maintain and they cannot further reduce it. I'm quite hopeful that in coming months the stock and the Oftech will improve. But if the economy does not grow, one cannot predict beyond certain points. Thanks, sir. Thanks a lot, sir. Thank you. The next question is from the line of Tarang from Oldridge Capital. Please go ahead. Hello, good evening. My question is Specifically on your plans of wanting to foray into element smelting. So essentially, while I understand that you have Coal and you can tie up with Nalco, But just wanted to understand what's the strategic thought process about entering into hot metal production When there is a global surplus domestically as well as internationally? See the growth in aluminum consumption in the country is increasing. Our consumption per person is almost the lowest in the world. No, I don't remember that. Just figures, but then it is less than half of the annual electric congestion of the world. And whatever projects have been done, that says that there will be improved demand and there will be This is it in the country. I'm not saying that we have entered into it. We are just exploring that possibility. We are getting the feasibility studies being done. Once the feasibility study is done and we find it profitable, then perhaps we will take up further steps. As of now, we are just We have formed we are trying to form that city so that we can do the groundwork. It doesn't mean the actual investment has been taken, but Rest assured, if the stability is positive and if there is a possibility of selling aluminum in the country, then only we'll go ahead. Okay. And so just to double check, while for the other projects you said that the capital risk and the technological risk will rest with someone else. Would the same principle apply even here? Nalco In the sense, we have not finalized what will be the thing, but in this also, we would like to induct some partner who can come with a good Technology. Okay. Thank you, sir. Thank you. The next question is from the line of Arun Kumar from Mellon Capital. Please go ahead. Yes. Good evening. I wanted just to ask like your The demand perspective going ahead. And one more question that I wanted to ask about your new ventures that you had taken into your solar power and all. So what is the CapEx plan over there? And like how soon do you expect them to venture out? About the demand, I said that Demand must rise in coming days because the stock already in that powerhouses is depleted. They cannot further go down Without lifting the power situation of the country, so and we are putting pressure on them so that they can increase their stock because in April May, June, the demand in the coming winter summer season, it is likely that the demand will increase tremendously. So to my mind, the demand must increase in coming months. And on the last 3 months also, we are seeing that coal based energy demand has increased by 8%. So that change if it continues then the Coal demand will definitely increase. Coming to the new ventures, I have mentioned that We are allocated very little money in next 2, 3 years. What we are looking for is somebody who can come and we facilitate them to establish the things. These are high-tech Solar battery is a high-tech industry and in which it will be very difficult without a person who is going to take that technology risk. In solar power, definitely Solar Ventures in the sense that solar power etcetera, installing the solar power etcetera. So we will Like to go ahead and invest so that Coal India in coming years become at least this carbon neutral company. Whatever we are using energy For production of the coal, at least that much carbon is neutralized by producing solar energy. And actually in certain pockets where we can use the solar energy, Captively, the savings will be huge. Okay, okay. That could be all. Thank you. Thank you. The next question is from the line of Parthiv from NBS Brokerage. Please go ahead. There is no response from the line of the current participant. So we will move on to the next question. The next question is from the line of Vinit Malu from Dirlasan Life. Please go ahead. Yes. Good afternoon, sir. Sir, my question is again regarding this capital allocation plan only. And although you said that you're still evaluating the Financial and technical parameters. So if you look at especially aluminum industry, even though it might look like wood industry From the outside, I mean none of the players actually on double digit ROC in the country. All of them are starting a single digit level whereas If you look at Coal India's financial, they are significantly superior. So it is not I mean, If we are not able to threaten, why would Coal India want to steer away into such an industry rather than use the cash within existing business All green business like solar power generation or returning to shareholders. I mean this thought of entering the thought of entering aluminum industry is very perplexing to us and shareholders. Vinit, there are 2 things. First thing, we are not saying that we are not going to invest in solar power. We are trying to maximize the solar power because even if we create infrastructure which is sufficient for our That's it, Svenvi, and we will make lot of money in the sense that power or whatever we are procuring from the grid is 7.7 to 7.5 rupees per kiln. And Whatever we do, the cost of this will be not more than INR 3,500,000. So there will be saving on that account, which I think It should be a good investment. And solar energy is one thing where the future lies. So as an energy company, we must look into that. But And paying to the dividend, we are committed to pay good dividend every year. And in this crisis year also, we are trying to maintain that level that's seen in the last couple of years. Now coming to this, we will go into it only if we are satisfied that The type of money we are making see, the type of money which we make in coal mining is not possible anywhere else because in certain pockets there are huge return. But Coal future is limited and hence if Coal India has to survive, it has to look for some business where we can do well. In this case also, if we find that returns are good, then only we will venture there. As you are saying that it is single digit ROE, etcetera, then perhaps we will exclude that front and then come back. Okay. And sir, when do we expect to take this decision? I mean, what's the kind of time frame? It will take another year or so. Let's see, Not in coming 6, 7 months. Let the feasibility report, etcetera, come. We have engaged consultants for doing those things. Let them come and we'll come will decide on that. But not 5, 6 months, no the investment is going to be made. Right. No, I understand that. Okay, okay. We'll release for another quarter or 2 in the Thank you. The next question is from the line of Rakesh Svyaz from HDFC Mutual Fund. Please go ahead. Yes. Hi, sir. Good afternoon. A couple of questions from my side. 1, you highlighted that the e auction Premium till now is almost 16%. But if you look at the last two quarters, Essentially, it's probably in lower than single or around single digits. So Essentially, the next two quarters should see significant improvement in e auction realization. Is that a correct hypothesis? What I said that till now the average realization of an e auction is 16%. In the last quarter, it was about 25%. 1st 2 quarters, it was slightly I mean, Q1 was very less. 2nd quarter, it was slightly higher and then 25% last quarter. Since January, it is 25%, average is 16%. That is my Sure. So around INR 1500 kind of realization that we reported in 3rd quarter, 4th quarter should actually see a significant improvement from that number? I hope so because the Response that we are getting is high, but then how the market turns is difficult to understand. And the international market is also high. So I hope it will increase. We have booked 92,000,000 tonnes, so another 30,000,000 tonne will be booked in this 2 months. And even if it increases to 30%, then 16% may go up to 17%, 18%, but beyond that, It will be difficult to accept this time. Sure. No, what I was trying to highlight or it will get more sense, Hari, that The off take has been reasonably lower. So it's still strong, but most of the off take that would have happened in last This month is of the bookings that were done in 1st and second quarter where the premiums were reasonably lower. So The bookings that were done in last 3 months where premiums are higher, we will start to reflect same in Next 1 or 2 quarters in the P and L. Is that a correct understanding? Quarter, the price Off tech price will definitely increase because in the last quarter, Whatever booking has been done is at higher rate. That you are right. Okay. That helps also. And secondly, sir, Despite all the uncertainties, etcetera, for next year, in terms of our preparation Both from the production and from the evacuation perspective, what is the kind of growth that one can safely assume if demand bounces back for us. We are expecting very high demand, but safely, if you say the 10% to 12% type of growth, we should be is easily available. In the 1st 3 months this year, the growth was not there and actually there was the growth of about 20% or so. But still we have achieved we are disclosing at almost what we achieved the last year or slightly higher on that. So next year achieving 12% to 13% growth should not be difficult if we start next year, I mean, beginning of the next year with a good growth. In those 3 months, the growth can be very significantly high and on the average that will help us in So essentially for the full year perspective, 12%, 13% growth, demand permitting should not be an issue With all these constraints, normally that Coal India operates within either in terms of production or in terms of evacuation, etcetera. To my mind, it should not happen because today also if there is a demand, we are facing huge demand problems in 2, 3 subsidies like MCL, Eberia, In the CCL, in DCCL, ECL and all these areas if the demand would have been there, Our lifting could have increased substantially. Actually in ECL, etcetera, we are unable to produce because the demand is not there. So I'm quite hopeful that in next year, if there is a demand, we should be able to get production increase by 12% to 13% easily. And one just for clarification purposes, you have been talking about maintaining last year's dividend. Just for clarity, When you are saying this, does this account for the DDT benefits? So essentially, the actual payout from Coal India including DDT last year was more than INR 15 or so or around INR 15. This year, DDT is not there. So does that account for DDT? Rakesh, will it be prudent for me to give such a specific reply? Okay. But I will give I'm again assuring that you will not be disappointed. Great, sir. Thank you so much and good luck. Just to mention Rakesh, actually in this difficult time when our production was Not as high as we were expecting. Our dispatches were slightly lower than last year. Our cost of production has reduced by 3%. I have Missed out back in the initial remarks. And to my mind, that is a great achievement for Coal India. For the first time, we are seeing that there is a reduction in passed on in total revenue expenditure. Last year, for 9 months, there were 56,000 for this expenditure, this year it is 54,000, which amounts to almost 3% reduction. And I think I'm quite sure that these trends should be maintained and our leverage is decreasing by 5% every year. If we maintain this trend, then the profitability should not be an issue if there is increase in demand. Great, sir. Reassuring to hear that. Thank you so much. Best of luck. Thank you. The next question is from the line of Noelle Vas from Ashika Stock Broking. Please go ahead. Yes, so I just most of my queries have already been answered. But I just wanted to know specifically, so Regarding BCCL, the off stake has and the production has been impacted for FY 2021. So what is the specific reason for it, sir? See, DCCL is a coking coal producing company. But that coking coal Well, basically being used for power coal and rest of the time that coal was easily listed. But this year we are finding difficult because power plants are finding it cheaper to source coal from other companies. So that is basic problem with BCCL. Now we are tying up this trying to sell that coal for non Power purpose. And to some extent, we have succeeded in the sense that we have tied up with Tata to wash their coal and maybe 2 lakhs 1.5 lakhs ton every month they will be washing and that will yield us very good results. We are trying to strengthen their watch list so that The vast coal can give us premium and the vast coal can give us premium. We are trying to sell their middling. But This year has been particularly difficult because they were not prepared for such a case. And we were relaxed in the sense that since the coal demand is there, There's no need to work on natural advantages that BCCL has. But I think that the way they are working in next 6 months, they will be able to improve upon their working and then The demand as a non it's a non regulated sector will be huge and that will help businesses to come out of the situation. Okay. And just one other thing, I just wanted to clarify. So the rail connectivity projects at the Lingraj silo and the CERL That is East Bay corridor. They are both expected to be commissioned by the end of March. So, I mean, it is reasonable to expect it around that time or I mean, what has the process been so far? Just held up because of one house there. Okay. There are only 50 meter connectivity left. We are following it up with specific operators on regular basis. And if that is removed And they have assured me that within 7, 10 days, it will be removed. So it is about 15 days only. So there is no reason that we should say that Lingraj connectivity In that pilot, electricity cannot be completed before 31 March. That Eastern Wind corridor, the testing has been done And diesel engines have run on that train on that track. So to my mind, there is no reason that it will not be completed by 31st March. They have assured me that everything is ready and perhaps before 31st March it will be non rating. Okay, that's all. Thank you, sir. Thank you. The next question is from the line of Amit Dixit from EDWISE. Please go ahead. Yes, thanks for taking my questions. Again, I have 2 questions again this time. The first one is on ODR expenses. So while in last two quarters Q1 and Q2, we saw some reversal of ODR expenses that but this time again they are in positive territory. So is it safe to assume that now we are done with preparing spaces and for production and we are all geared up to increase production? To my mind, it is right what you are saying. Basically OBR problem we were facing in Gehra, Deepika and all the mega mines Actually ODR removal has not been to the sufficient level and We are trying to increase OE removal further. This quarter, we were facing lot of problem of explosives, we thought of which OBR was not up to the expected level, but then still, our growth has been 20%. If we have To keep our minds in readiness to meet any demand, sudden increase in demand, then OBE removal is a very critical thing and we are emphasizing on Over the year, if you see on the 29 months or 11 months, our OV removal has increased by 20%. And still in certain mines, we are facing the situation where OV remover has to take this furthermore So that production becomes easier. So is it fair to assume that going ahead this will be in positive territory only So, we are adjustment provision that we have. Yes, yes. It was in positive territory. Okay. So the second question is on essentially tax rate. So we find that this quarter tax rate is around 35% compared to 27% last quarter. Any one off reason for that and what tax rate would you guide for the full year? I couldn't get your point. The tax rate of tax rate of tax is 35% in this quarter. There is a holding of dividend amount of INR 5 0.8 crores for which we have provided INR 128 crores. So this is one thing, INR 128 crores, which will I mean, this has been provided for and it will be released after the dividends are Released in coming months. And then WCL from our loss making company has become a profit making company and hence there was slight increase in the tax. So these are all accounting things. I won't be able to but the tax rate is only 25%. We have not reverted to anything in that. Okay, got it. So for the full year, will it be slightly higher than 25 basis? The or you will go back to some We will remain in the 25% thing. We have opted for this, but some tax assets which were created earlier, which are being released or something of that accounting thing is taking place because of which this has happened, but in coming months it will get stabilized. Okay, sure. Thanks, sir, and all the best. Thank you. The next question is from the line of Vishal Chandak from MK Global. Please go ahead. Yes. Thank you very much for taking my question, sir. Sir, as just Amit mentioned, There is an OBR which goes on a negative zone generally for the last two quarters which moved to a positive territory this quarter. How should we look at OBI? Is it possible to share a plan for the OBR going forward? I mean, what kind of numbers or cubic meters do we plan to do on a Quarterly basis, by the way we have a plan for annual coal production. Can we do something like that on that so that at least let's say it's more predictable? Coal production into 2.2x. That should be the average OB removal. Kamint, because there was a backlog in the last few years, this year has been slightly higher. Next year, again, it will be slightly higher, but thereafter, it will stabilize in the territory of 2.2, 2.3. But OB, very negative, means provisioning for OB removal is not a healthy sign for any mine. So it will be always to them that We should do commensurate OV removal so that quality improves, so that productivity can be improved. No, I completely agree on that part. So basically, it means I don't know when we are doing provisioning that means whatever was planned As per the mine life has not been achieved, so a provision has been created, right? There was a backlog issue seen in the last 3, 4 years. Continuously, we were removing OB in the range of 115,000,000 cubic meters. That It created a situation that in this year verticals were created in many of these mines and then after rains where we tried to increase the production That was a constraint. Secondly, it affects the quality also. So we have been insisting right from the beginning in this year to remove OB And I think we have been successful to a great extent. Sure. So my next question again was coming back to your investments in the aluminum business. Just wanted to highlight 2 points. 1, Hindalco has clearly said that they do not want to set up more smelters in India. And when we look at the NILCO, a bunch of its profits are accumulated out of sale of alumina and not aluminium. So clearly investment in aluminum smelter Partnering with them. I don't know how so far would it be feasible from Coal India's perspective given the fact that The ROE and Mining business is significantly superior and no miner in the world generally other than Rio Tinto has invested in the smelting capacities. So this would actually be not a very significant value accretive step in my view. Please, I may have mentioned also that we are exploring many things. And it's not that the All the things that we are exploring will be achieved. We are looking for things where the Coal India should invest so that it becomes it remains Economically viable company in the coming years also. As a coal company, it cannot survive for long. The first option is definitely the energy thing, Solar Energy thing or Renewal Energy where we are definitely going to invest something and the returns will be high. And all of you agree that that is an area in which we must invest. Aluminum business is something that we are exploring. We are doing our due diligence. We have appointed the consultants. And as a government company, we cannot keep anything confidential. So All the things that we are exploring is in public discussion. Doesn't mean that we have already invested or we are going to invest. We are looking for opportunity. If we see that there is a good ROE, That only we'll limit. Let's wait for one more quarter and then perhaps I will be in a better position to reply about all these questions. That's very helpful. So just lastly, if I may squeeze in one more. What are you looking so what should we take as a production guidance for FY 2022. For 2021, would it be fair to assume that 600,000,000 tonnes looks at all order as of now? To my mind, 600,000,000 tons is not difficult, but it will depend how the dispatches take place in coming few days. Not few days, means that's up 2, 3 weeks. If the dispatches does not if the dispatch do not improve significantly, Then the stocking of the code is something which should is not desirable. But if the SaaS is good, then the production It's not a problem. So, costing 600 should not be a problem. Next year, I'm definitely targeting something 12% to 13% of growth, even more. But again, This stock of this year will and the demand next year will affect our production next year because coal should not be stopped beyond a point because it reduces its element, quality gets deteriorated It's quality deteriorates over a period of time. So we have to take that also in that also we have to keep in mind. So when you're talking about 600,000,000 tonnes, we are essentially saying that we'll have an output of 2,200,000 tonnes per day for the 4th Quarter in terms of dispatches. So I just wanted to confirm, are we on that run rate? Production is we are on run rate. We are doing more than 2.2 nowadays. So achieving that type of production will not be Dispatch is still in 1.8, 1.9. If it touches to 2, which you touched last year, then production will be easy. Fantastic. So that's all from my side. Thank you very much, sir. Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead. So thank you for taking my question. So just one question, you have been highlighting about focusing on some of the import customers and trying to supply them Coal India Coal. Can you highlight any steps that you have taken given what's happening in the international markets? Any steps that we have taken in order to convert some of those imports into domestic coal supply? Okay. We have taken minutes. First thing, we have created another Yes, option means window that's for import substitution and perhaps 8,000,000 tonnes. In that, we have booked about 8,000,000 tonnes of coal. Secondly, we have relaxed The ACQ requirement from 75% to 80%. And we have said that beyond 80% also, somebody is demanding, We will fulfill. And so in many of the plants, you will see that we are supplying more than 100,000,000 tons. I mean 100% of their requirement in the Well, if in certain plants, whatever their committed quantity was, we are giving more than 100% to them. So to that extent, For power sector, when our blend for blending purpose coal was being used, it has reduced by 55%. Even for the Power plants which are located on the coastal area, we have approved them and since the price of the imported coal plus the Shipping charges, etcetera, has increased. They have taken coal from I can give you some names also like some popped plant Started taking coal from Eastern Coalfield Limited. And then the North Indian plants of Punjab, etcetera, Nava and And only Sabo, they never used to check coal from Coal India. Now they are taking coal from us. So all these power plants, in power sector, we have been quite Successfully in replacing the imported coal. In non power sector, we were not able to supply earlier. We are supplying to all the non regulated sector as well. And because of that only, this e oxen volumes have increased from 60,000,000 tonnes to 92,000,000 tonnes. And All this coal would have got imported if we would not have supplied to them. Also could you highlight non power coal that you are supplying? What is the average calorific value of that coal? Because one constant complaint we hear from non power sector is about the quality of coal. So any views on that? Non power sector, the whole range is there, but there are certain power this Non power sector customers who require a very high caloric value coal, which is not available with us. So to them, we are not able to tackle like Cement manufacturers, but spawned there in Aptica who are taking coal on the range of 4,500 to 5,000 GAR coal, We are able to supply and many of them have started taking 60% to 70% of their requirement from us. We have to we are We're now working constantly on improving the quality of the coal. The first thing that we have done is improve upon our OBR, so that In advertent, the mixing of the soil that was taking place with the coal has been stopped completely. Instead of using that blasting method, We have increasingly using, yes, such as minus whatever band etcetera is coming in Indian coal can be That's listed at the time of production. And the front is taking place continuously. So all these These issues are being taken care of. We have already introduced a third party sample and whenever the complaint is being raised, We are requesting the consumers to do a joint sampling thing of things, Hatin and Coal India is always willing to welcome anybody to see our minds And to see that what are the whole we are supplying at this edge point. So that has definitely increased their confidence of the consumers. We are constantly interacting with our consumers. Actually, I myself have held 3 or 4 meetings with the consumers. And with points that they are raised and a general point, we are trying to tackle them at the very earnestly. I think in last 1 year, the consumer satisfaction has improved tremendously. Sure, sir. Thank you. That's it from my side. Thank you. The next question is from the line of Rahul Jain from Systematics. Please go ahead. Yes. Hi, sir. Just One more question I had. Sir, your CapEx over the years has gone up very dramatically and you're giving guidance of around INR 16,000 crores for next year. There's a very big contradiction in the statement that you see yourself are looking at coal being not having a trick picture. So why can't we look at more of sourcing more of low CapEx, the kind of production. So you conserve cash for your future divestment, future has diversification and things like that? Coal India has not invested properly in its capital building. We cannot continue to supply coal at higher levels unless we invest in I'm giving you examples where we are investing so that and number One moment I can see once I had a minute. We have invested something like INR 3,000 crores this year for HCMM, heavy equipment nationally. And maybe next year again, the equipment number will increase. Unless we invest in this, quality coal and coal production cannot be increased from our mines. Still, we are producing about 30% to 40% of coal to our labor. It is very critical for us to improve the productivity of this labor and this can be done only if in the larger mines we deploy very large equipment. Small equipments, they will never achieve the thing that we are targeting for. So that is one thing. Then we have land has become cost I have to spend on land. Earlier, we tried to we used to get the land at the free of State government. Actually, the state governments have always been objecting, so there are always disputes. So actually, we have to pay a reserve requirement for their land also. So in this year, again, we are investing something like INR 2,000 to INR 2,504 on this issue. 3rd thing is mechanization of the evacuation process. As I had mentioned in earlier thing also that We have identified 35 brick coal handling plant for 1st mile connectivity project. And I had promised that by March end, they will all be the work on the ground will start or the work order will get issued of that 31 projects. We have issued not 31, 29 projects we have issued our product and 2 more LOAs will be issued tomorrow or day after. And next another 4 will be issued 2 will be issued in this month and another 2 will be issued next month. So that will All these are very critical. See, coal is going to survive for another 20, 30 years. If we don't supply coal and if we don't supply at a lower cost, it will become all the more difficult for Coal India to survive. And all these environmental issues are also significant. We have seen during the pandemic and then shutdown period that our mines were operating, but our transportation was not taking place And the environmental situation improved tremendously. So it was all the studies says that the production of the coal does not impacts that environment as much as this transportation through vehicles do. So this Mechanized transportation is also very critical. And third thing on which we are investing heavily is basically rail connectivity. There are 4, 5 projects which were taken up earlier, which were not doing which were not moving fast. Now we have created a situation that by monitoring them regularly that all these projects are now working. And within next 2 years, all these projects will get completed. So, we are not wasting money. We are all doing money to invest. Sir, also coming from that your customers, there are hardly any thermal capacity In fact, NTPC itself has said that they will not add any more thermal capacities in India. So who do you think is going to buy a lot of this coal that you plan to increase capacities and do so much CapEx? And so much CapEx. So I just want to understand what are your thought process over the next 5 years because eventually you will have to end up generating power, right? First thing. First thing that there is lot of capacity in India, which is not under production, which if the India has to grow this for us capacity will be realized. 2nd thing, power plants are operating at very low PLF And this BLF has to increase if energy consumption in the country increases. 3rd thing, whatever we are producing, even if suppose we don't Go for increase. We cannot continue to transport or evacuate in the old manner as we were doing earlier because that creates lot of environmental problems, etcetera. 3rd thing which I wanted to mention is these projects, whatever capital investment which we are committing is going to take place in next 5 to 6 years. It is not going to happen tomorrow or day after. And if that demand does not increase, than those major in the etcetera which we take in phases. So we'll stop there and we will not develop the mine. So our CapEx will reduce if the demand is not there. So CapEx is not something like installing a factory Coal mining is not something like installing the factory and not running that. Here, whatever CapEx is In land development, rehabilitation, all those activities and those will not take place in case the demand is not Our whole CapEx is linked to demand. Right, right, right. So lastly, how much was our cash balance as of 31st December? Okay. 1st December, cash in our bank was about INR 12,000 crores. INR 12,000 crores. Okay. Thank you. Thank you so much. Thank you. The next question is from the line of Anuj Sharma from M3 Investments. Please go ahead. Yes. Thank you. This is I just want to understand what are the constraints chiefly external and internal in a mine closure? And typically, how quickly can we accelerate this business? See, the first thing is, we don't close the mine unless The last spin also he was accelerated. That was the principle we were following. We are going to change this. If the last It becomes uneconomical and we should lead that coal and come out of it. So if that process, if that thinking changes then lot of mine project will take place. And second thing, I would say there was no monitoring. But in this year's last 2 years, we have been closing the mine. And actually there are withdrawals from the mine closure fund. So this year also there is withdrawal of about INR 500 crores, last year again there was a withdrawal of over INR 700 crores. So mine closure is now taking place. Earlier, there was a thinking that we should not close the mines unless the last even the last bit of the coal is not exerted. Now that thinking is changing And we are closing the mines. All right. So chiefly, most of the constraints are internal. There are no external Approvals and constraints, which slower your mine closure process. In my mine, there is hardly any external pressure or an external constraint. All right. My second question is related to that once a mine gets closed, how efficiently are the excess or the surplus manpower deployed to another mines? See, okay. You are if you are talking in the context of closing the mines that we are doing Because of non profitability, am I right? That's right. That's right. Okay. Then that I understood the word mine closure and the final closure. You see many of the manpower is reducing rapidly, The range that I said 15,000 every year, 14,000 to 15,000 it is reducing every year and it's likely to increase further next coming years. So in many of the mines where we are closing down, they are all old mines. So there is some natural attrition that takes place. And certain officerless manpower are required in other mines. So we shift those manpower to those mines. Though it is a difficult task, but then if there is no work at all, then the shifting takes place. Like the 80 mines that we closed on in last two 3 or 4 years, initial manpower was 15,000 or so and now the manpower left is around 4,000, 5000. If I can give you a quick figure later on, then that is the range I'm talking about. So actually there was reduction of RMB12,000. That's another point that we have found that by closing the mines, even if we pay the laborers at their full measures, we Saves a lot of money because the acceleration is so small that overhead costs, etcetera, are very high. And even the Price of the coal that we get is not sufficient to meet the overhead costs. So it is basically quite a good solution to close down these mines To suspend the production from this side. All right. Thank you so much. Thank you. The next question is from the line of Rahul Modi from ICC Securities. Please go ahead. Sir, just wanted to update on the ESG report that you had mentioned that you're working on through a vendor. So when should that come out and any thoughts on the ratings? By February and it should be out. KPMG is working on that. They are likely to submit draft report in a day or 2, Might have submitted in the last day. I don't know about that, but they had given that until before 15th February, they will give the draft report. And maybe by the end of this month, they will give the final report. Right, sir. Thank you. Thank you. The next question is from the line of Vishal Chandak from MK Global. Please go ahead. Mr. Chanda, Please go ahead with your question. My questions were answered. Thank you so much. Thank you. The last question is from the line of Saurabh Bansal from STARZ Invest. Please go ahead. Yes, sir. Hi, good evening. Thank you for taking the question. So my one question is that in financial year 2019 2020, The average realization per ton of coal has been somewhere close to 15, 30, 15, 40. And in this year, it has fallen down to 14, 20 almost, a decline of 89% gross margin. So going forward for financial year 2022, 2023 and maybe at a longer term period, What will be the average coal realization that one would expect? To my mind, the coal realization should improve Significantly from what we have achieved this year. Whether we achieved the 1500 plus that we achieved, but year before, it's difficult to say. It will depend How much demand is there? Because most of this increase is split because of the premium that we get in e auction. We have improved the e auction Quantity wise, it has improved more than 60%. But still, the realization was in the range of more than 40% premium that we got in the last year and this year is 16%. So the difference is basically coming out because of that. But I'm quite hopeful whatever loss we suffer because of reduced reduction in the price, this average realization We'll make to higher production cost higher production, higher sales of the coal and secondly, reduction in the our own Cost of the production. Right, sir. Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Rahul Modi from ICC Securities for closing comments. Thank you very much everyone and special thanks to Mr. Agrawal for giving so much time and explaining each and every detail about the progress in the company. Thank you very much once again.