Coal India: With the advancement of humans over the years, electricity has turned out to be the backbone of the modernization process. Though there are many sources of electricity, coal has always been the primary resource for power generation. One such company involved in the production of coal in the country is Coal India. And here we are going to analyze Coal India and dive deeper into their future plans & more.

Industry Overview

The coal market consists mostly of three types of coal: steam coal, coking coal, and lignite. Steam coal is mostly used for power generation, whereas coking coal is used in steel. Lignite is primarily utilized for power generation and the creation of synthetic fuel. According to recent reports, despite extensive push for renewable energy, the coal industry is expected to grow in the future.

This could be ascribed to characteristics such as widespread availability, simplicity of transportation, low labor costs, a simple and effective source of power generation, and lower capital expenditure when compared to renewable energy. According to Market Insights, coal production is projected to increase from 8.6 trillion kg in 2024 to 10.6 trillion kilograms by 2028.

Company Overview Of Coal India

Coal India Limited (CIL) is an Indian central public sector undertaking under the ownership of the Ministry of Coal, Government of India. The company is headquartered in Kolkata. It is the largest government-owned-coal-producer in the world. Coal India is also the ninth largest employer in India with nearly 272,000 employees. The company also contributes 82% of the total coal production in India.

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Coal India was conferred with the Maharatna status by the Government of India in April 2011 making it one among the thirteen with the status.

Subsidiaries & Operations of Coal India

Coal India manages the operations through its subsidiaries namely:

  1. Bharat Coking Coal Limited
  2. Central Coalfields Limited
  3. Eastern Coalfields Limited
  4. Mahanadi Coalfields Limited
  5. Northern Coalfields Limited
  6. South Eastern Coalfields Limited
  7. Western Coalfields Limited
  8. North Eastern Coalfields
Production in Million Tonnes
Subsidiary9m FY249m FY23YoY %
Eastern Coalfield Ltd.3023.826.3
Bharat Coking Coal Ltd.29.825.915.1
Central CoalfIelds Ltd.55.849.313.1
Northern Coalfields Ltd.103.997.36.8
Western Coalfields Ltd.43.638.413.6
South Eastern Coalfields Ltd.123.1106.615.5
Mahanadi Coalfields Ltd.145.5137.75.7
North Eastern Coalfields0.120.12-0.7
Coal India Ltd. - Total531.947911

Additionally, another subsidiary of Coal India is Central Mine Planning & Design Institute Limited. This helps Coal India in planning, and exploration and also provides technical support.

Coal India is one of the largest producers of coal in the world. As of the latest data Cola india operates 84 mining areas across 8 states of the country. Coal India has close to 352+ mines out of which 174 are open cast mines while 158 are underground coal mines and 20 are mixed mines. However, close to 90% of the coal extracted by the company comes from its open cast mines.

Stake sale by Government

The IPO of the company was filed in October 2010 in which a 10% stake was offered for sale by the government at ₹245 per share. The IPO was oversubscribed by 14.17 times. On the first day of its stock market debut, its shares surged 40% higher than the IPO price. With the listing, CIL became the fourth most valuable firm on the Indian stock market. Again in 2015, the Government of India sold another 10% of its stake, this time priced at ₹358 per share.

Financial Highlights Of Coal India

Financial Year2020 (Mar)2021 (Mar)2022 (Mar)2023 (Mar)2024 (Mar)
Revenue (Crores)96,080 Cr.90,026 Cr.1,09,715 Cr.1,38,252 Cr.1,42,324 Cr.
Net Profit (Crores)16,700 Cr.12,702 Cr.17,378 Cr.28,125 Cr.37,369 Cr.
Operating Profit Margin %22 %21 %23 %27 %34 %
Return on Capital Employed (%)72 %46 %54 %70 %65.1 %
Earnings per share₹ 27.12₹ 20.61₹ 28.17₹ 45.7₹ 60.69

The company’s revenue has grown leaps and bounds from 96,080 Cr. to 1,42,324 Cr. in the last 5 years because power demand has soared across the world. Besides that Coal India was able to improve their margins from 22% in 2020 to 34% in 2024 due to the massive jump in commodity prices because of global turmoil. This has also helped the company in improving its net profit and EPS from 16,700 Cr. and ₹ 27.12 in 2020 to 37,369 Cr. and ₹ 60.69 in 2024 respectively.

Competitors

Adani Enterprises: is the flagship company of Adani Group. The company is engaged in varied businesses ranging from mining, integrated resource management, airport management, data centers, etc.

Due to government regulation of mines and minerals, Coal India Limited enjoys a monopoly on coal production in the country. However, Adani Enterprise has recently begun importing coal from nations such as Australia, Indonesia, and Russia. Although Coal India’s production is substantially higher than imports by Adani Enterprises. 

Key Metrics Of Coal India

MetricsCoal IndiaAdani Enterprise
Market Capitalisation₹ 3,00,926 Cr.₹ 3,52,352 Cr.
Current Market Price₹ 488₹ 3,091
Price to Earnings Ratio8.01100
Book Value₹ 134₹ 343
Dividend Yield %5.18 %0.04 %
ROCE65.10%9.87 %
Debt to Equity Ratio0.081.67
Promoter Holdings63.13 %72.61 %
FII Holdings8.41 %14.41 %

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Future Outlook Of Coal India

The future of mining and quarrying appears dubious, owing chiefly to the Paris Agreement on Climate Change, which nations have joined to decrease net carbon emissions. Aside from that, other problems include global turbulence, rising commodity costs, and supply-side pressure. However, Coal India’s prospects appear promising, which could be due to the country’s increasing electricity consumption due to technological advancements. Coal’s low cost and abundance in India will keep it as the primary source of electricity generation even in future.

  • Diversification: Venturing into solar power with a 3,000 MW project, exploring coal gasification and coal bed methane extraction.
  • Production increase: Targeting 1 billion tonnes annual production by 2024-25, expanding mines like Dipka and Gevra, to meet the growing demand for electricity..
  • Technological upgrades: Implementing drone surveys and GPS-based truck dispatch systems. Developing AI-powered coal quality assessment.
  • Connectivity improvements: Investing in conveyor belts and rapid loading systems at mines. Collaborating with Indian Railways for dedicated freight corridors and developing coal terminals near power plants for efficient delivery.
  • Sustainability: Launched “Coal Neer” bottled water from mine water, planning pumped hydro storage projects, and focusing on land reclamation.

SWOT Analysis

Drivers: Rising power generation demand is one of the most important reasons that will act as a driver for the coal sector. Aside from that, the surge in global upheaval would keep prices high, allowing the corporation to maintain excellent margins.

Restraints: The coal industry’s biggest challenge would be the government’s goal of being a net zero-emission state by 2047. In addition, the government’s push for renewable energy sources would have an impact on the company’s prospects.

Price Target

Emkay Global: has given a “BUY” rating on the stock with an 18% upside potential to the level of ₹550. As the EPS of the company was higher than the estimates.

Anand Rathi: has also given a “BUY” rating with a target of ₹520 owing to its strong volumes and being one largest coal producers globally. Additionally, the rising power demand would act as a catalyst for the company. 

Axis Direct: believes the share price can go up to the level of ₹505 and continues to maintain a “BUY” rating on the stock. As it believes the fundamentals of the company are extremely strong.

Conclusion

It will be interesting to see how Coal India’s tale progresses in the future. Whether renewable energy sources will take the lead over the next two decades, or if traditional energy sources will continue to dominate. Furthermore, would increased rivalry from Adani Enterprises be a barrier in the future?

Written By Dipangshu Kundu

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