Coal India e-auction premium cools down to 192% in January-March

Coal Insights Bureau

During the January-March period, Coal India’s (CIL) average selling price rose 13 percent year-on-year (y-o-y) and 2 percent quarter-on-quarter (q-o-q) to Rs 1,877 a ton while e-auction average realisation jumped 86 percent y-o-y to Rs 4,525/ton but was down 10 percent q-o-q.

E-auction premium eased to 192 percent from an all-time high of 329 percent in Q2FY23 and 241 percent in Q3FY23, but it was still above the historical average. According to analysts, the integration of all five different modes of auction into a single e-auction has led to better price discovery for coal and resulted in a structural shift in e-auction premiums.

“Though e-auction sales at 16.40 mt were lower by 41 percent in volume terms in Q4 compared to 27.65 mt of similar quarter FY22, higher premiums under the e-window helped CIL in cranking up e-auction sales by Rs 690 crores. The realisation per ton of coal was Rs 4,526 under auction segment in Q4 against Rs 2,434 in same quarter of FY22. The jump was Rs 2,092 per ton or 86 percent,” Coal India said.

E-auction continues to drive profitability

Though e-auction premiums have cooled off from their highs, they were compensated by higher volumes in Q4FY23.

As coal availability to the nonregulated sector (NRS) increases, Coal India has an option of placing up to 10 percent of its total production or 20 percent of production after fulfilling FSA deliveries under e-auctions.

“We expect Coal India to sell 68-70 million tons (mt) of its volumes via e-auction determined prices in FY24. Higher sales volumes via the e-auction route improve profitability as the prices are higher than

FSA-determined prices,” institutional research of brokerage house Motilal Oswal said. Motilal Oswal sees e-auction premium for FY24 at 99 percent.

PAT in FY23 up 62% despite wage provisions

Sustaining strong financial fundamentals, CIL’s profit after tax (PAT) for FY23 posted 62 percent growth at Rs 28,125 crores compared to Rs 17,378 crores of FY22.

This was despite provisioning Rs 8,153 crores in the accounts in 2022- 23 towards wage revision of CIL’s non-executive manpower.

Climbing to an all-time high, the annual PAT bested the previous high of Rs 17,464 crores recorded in FY19 by 61 percent.

Higher volume sales and increased premiums in e-auction bolstered the company’s profitability.

CIL recorded Profit Before Tax of Rs 7,642 crores and PAT of Rs 5,528 crores in Q4 of FY23.

“Both PBT and PAT have shrunk by 18 percent compared to the same quarter of FY22 primarily due to increased provision towards the wages in NCWA-XI,” Coal India said.

PAT would have been the highest-ever in any quarter had the provision not been made.

CIL lifted its profit into higher orbit despite the company capping its coal prices for over past 5 years amidst rising input costs, especially diesel and explosives and increased wage cost due to provisioning in the accounts.

Higher volume sale by 17.34 mt and better average realisation under FSA resulted in a net impact of around Rs 3,879 crores in Q4. FSA sale increased to 167.45 mt in Q4 FY23 compared to 150.11 mt of preceding fiscal’s Q4.

Realisation per ton of coal under FSA category was Rs 1,550, an increase of 5 percent, compared to Rs 1,470 per ton of Q4 FY22.

Whereas, for entire FY23 realisation per ton of coal under e-auction was Rs 4,841 against Rs 1,879 per ton in FY22, up 157.6 percent. The same in case of FSA sales was Rs 1,475 compared to Rs 1,406 of FY22.