CIL’s capex soars 33% to Rs 7,027 crore in 1HFY23

CIL on November 7 reported a 106 percent growth in consolidated net profit at Rs 6,044 crore for the quarter ended September 30, 2022, against a profit of Rs 2,933 crore in the year-ago period.

Coal India’s (CIL) capital expenditure (capex) soared by 33 percent in the first half of the current fiscal year (1HFY23), compared to the same period in FY2022, with the company attributing the growth to its expansion of coal evacuation infrastructure.

The capex of Rs 7,027 crore during April-September, 2022 surpassed Rs 5,300 crore of the comparative period last year by Rs 1,727 crore, thus posting a growth of 33 percent, CIL said in a statement on November 9.

The two coal evacuation infrastructure heads - setting up of coal handling plants (CHP)/silos and railways lines - together accounted for 36 percent or Rs 2,547 crore of CIL’s total capex ending September FY’23.

The update on CIL’s capital expenditure is significant because India faced its worst power crisis in over six years in April due to higher electricity demand because of a sudden heatwave which spiked the country’s power demand to an all-time high.

This happened despite record production by CIL during the year ended March 2022.

Yet, the majority of the thermal power plants had coal stocks at critical levels primarily because of logistical issues in coal transportation. CIL is the largest public-sector coal producer in India.

It is to avoid a recurrence of the April-May crisis, that the coal ministry and CIL took up the task of revamping its coal evacuation and transportation systems. It came up with a National Coal Logistics Plan and all these expenditures are being carried out as part of this plan.

Construction of CHPs/silos under first-mile connectivity was the major capex head at Rs 1,489 crore in H1 FY’23 with an increase of 2.4 times compared to Rs 614 crore in the corresponding period a year ago. “This underscores CIL’s intent to put in place a strong coal transportation infrastructure to move greater quantities of coal in future. Most of the expenditure was incurred by CIL’s three subsidiaries MCL, NCL and South Eastern Coalfields Ltd (SECL),” the CIL said.

Laying rails corridors and rail sidings was the next major head where the capital expenditure has risen to Rs 1,058 crore with an upsurge of 33 percent. Capex under this head during H1 of the last financial year was Rs 793 crore. SECL accounted for more than 56 percent at Rs 589 crore.

“Capex push is essential for long-term growth prospects. To align the increasing production with robust transportation logistics, CIL is fast-tracking the development of its coal evacuation system. This would help in handling the seamless movement of coal in future,” said a senior executive of CIL.

CIL on November 7 reported a 106 percent growth in consolidated net profit at Rs 6,044 crore for the quarter ended September 30, 2022, against a profit of Rs 2,933 crore in the year-ago period.

Consolidated revenue for the state-owned coal producer rose 28 percent on-year to Rs 29,838 crore from Rs 23,291 crore registered in the year-ago quarter. The performance was aided by higher realisations and modest growth in dispatches compared to last year.

During the H1FY 2023 period, capital expenditure on coal evacuation projects pipped the heads of land acquisition and procurement of heavy earth moving machinery (HEMM) which conventionally comprises the bulk of the capex.

“The capex which was Rs 6,270 crore in FY’20 has improved significantly in recent years. The current fiscal’s H1 capex was 12 percent more than that of the entire year’s capex of FY’20. CIL is likely to close FY’23 with Rs 16,500 crore which would represent a 2.6X capex jump in a span of three years. Expenditure on land and HEMM followed with Rs 1,056 crore and Rs 618 crore, respectively,” read the statement.

A second CIL executive requesting anonymity said, "it is essential that concurrent with production, capex is also hiked up to sustain the growth momentum. “We have increased our capex on the introduction of modernised fleet and laying new rail lines which are catalysts for output and off-take growth,” said the executive.

Post the CIL’s September quarter profit, several brokerages have suggested buying the stock. Motilal Oswal has a target of Rs 325 on the stock, while ICICI Securities has cited a target price of Rs 294.