COAL INDIA

Coal India stock hit rock bottom on the back of its dismal performance for Q1FY14. Consolidated net sales was flat (YoY) at Rs.16472 but net profit dropped 16% at Rs.3731 crore. Production during the quarter was flat at 102.8 million tonnes (MT) v/s 102.4 MT YoY. Volumes rose 2% at 115.36 MT but realizations dropped 2%. This the company has blamed on e-auction where the realizations dropped, which came in at Rs.2140/tonne compared to Rs.2516/tonne (YoY). Its higher tax rate of 34.4% v/s 29.3% has also contributed to the fall. EBITDA margin has dropped from 29.2% to 24%. Total operating expenses rose over 6% at Rs.12,990 crore wherein its employee expenses rose to Rs.6813 crore, which is  52% of the entire cost.

This is one of the largest coal companies in the world and ideally, if managed well could control prices. But thanks to bad governance we are in this situation where despite the company having the power to decide the price, is down in the dumps, with falling sales realization. The market and investors are angry that a cash rich company is today being run more like a Government department and not like a corporate. It is a sad state of affairs where the company which accounts for over 80% of the total domestic coal production is today in this state. In Fy13, the company had reported a production of 452.5 MT. Going ahead, the company expects margin pressures to remain through FY14.