a major concern of investors Coal India Limited(CIL) is involved in wage negotiations. In the June quarter (Q1FY23) earnings call held on Thursday, CIL’s management said that discussions are on with the employees’ union and it will provide 150 crores per month for increment. the miner had provided 100 crores per month in Q1. Remember that CIL increases the salary every fifth year, and a revision is due from July 2021.
However, the increase in total wage cost is likely to be minimal as 12,000-13,000 employees, mainly in the higher cost bracket, will retire in FY23, the company said. Moreover, the hike in fuel supply agreement (FSA) prices will offset the increase in wage bill.
“We anticipate wage growth at 25%, with an offset FSA price hike of 6%. We will be closely monitoring developments in this regard in the form of wage hikes and FSAs,” analysts at Edelweiss Securities said in a report on September 8. Price growth is key to maintaining profitability.
The bulk of CIL’s mined coal is sold through FSAs but this does not add to the profits. On the other hand, coal sold through e-auction is a major driver for growth in profits. The route tracks international coal prices, which have risen significantly so far in 2022.
With increased power demand, The supply of CIL to this sector is at a high level., thus reducing the availability of coal for the non-regulated sector. Further, “improvement in the e-auction process has resulted in the integration of five e-auctions into a single e-auction for end users. This, in turn, has resulted in a substantial increase in premium since March 22. Integrated e-auctions The premium has increased by over 290% since the start of the auction,” analysts at Motilal Oswal Financial Services said in a report on September 8.
For the rest of FY 2013, CIL expects premium to be in the range of 300-400%. The e-auction volume is estimated to be 70-90 million tonnes in FY13, with pick-up expected in the second half of FY2013.
Overall, by FY24, CIL expects to achieve a production of 840 million tonnes and is expected to produce over 900 million tonnes by FY15. FY23 production target is 700 million tonnes.
CIL shares have gained 58% in the last one year and are currently hovering near their 52-week high 240.50 per. The high demand for coal is likely to persist for some time, which means that the near- to medium-term prospects for CIL are good. But progress with respect to FSA price hikes and wage renegotiation remains significant.
catch all business News, market news, today’s fresh news events and breaking news Updates on Live Mint. download mint news app To get daily market updates.