This PSU Company Aims For Record Output As Management Announces Expansion Plans; Do You Own?

In response to surging power demand, state-run Coal India is set for expansion, opening five new mines and boosting capacity at 16 existing ones, according to the company's Chairman, P.M. Prasad. The move comes as the country increasingly relies on coal to meet record power demand, with coal-fired power output outpacing renewable energy growth for the first time since 2019.

Coal India, the world's largest coal miner, has experienced a resurgence, with profits and share prices soaring since early 2023. Prasad revealed that the company's record output is poised to increase inventories at domestic coal-run power plants by 16.1%, reaching 40 million metric tons by the end of March.

Despite facing challenges in meeting output goals for 16 consecutive years, Coal India is on track to exceed its production target for the second consecutive fiscal year ending March. Looking ahead, the company aims to achieve a more than 7% boost in output, reaching a record 838 million tons for the fiscal year beginning April 1.

In a bid to support this growth, Coal India plans to initiate operations at five new mines, boasting a combined annual capacity of 14.3 million tons. This expansion is expected to provide a crucial response to the escalating demand for coal in the country.

Coal India's revenue growth has outpaced cost increases in recent years. However, Prasad acknowledges that spending surged by nearly 20% in both 2022 and 2023. To counter this, the company is eyeing higher outsourcing of mining activities and anticipates natural attrition, averaging 12,000-13,000 employees annually, to help manage expenses. Currently, the company employs over 220,000 individuals.

Coal India has awarded nine projects with an annual capacity of 83 million tons to private companies. Prasad mentioned that an additional two projects capable of producing 32 million tons are likely to be awarded before the end of March. This marks a shift as the company diversifies its operations by building both solar and coal-fired power-generating plants.

Interestingly, Coal India is also exploring opportunities beyond coal. Prasad revealed that the company is actively scouting for lithium assets in Australia, a crucial move as India seeks to secure access to minerals critical for the energy transition. Although details remain scarce, preliminary talks with Australian companies are ongoing.

The global decline in coal prices last year prompted Indian traders and users to increase imports of thermal coal, rising by 9.4% to 176.3 million tons in the year ending December 2023. Prasad noted that non-power users were particularly active in importing coal. However, lower seaborne coal prices have impacted Coal India's margin on spot auction sales, even as auction volumes increased by nearly 80% to 73 million tons in the ten months ending January.

Despite these challenges, Prasad remains optimistic, stating that the company is on track to auction about 20% of its output for the fiscal year ending March. Additionally, Coal India plans to continue offering between 10% and 20% of its production through auctions in the coming year.

Coal India's shares were seen trading with gains of 2%, reaching Rs 475.55 per share as of 10:45 am on the National Stock Exchange (NSE). The stock has delivered returns of more than 120% in the last year.