Rating Rationale
September 28, 2022 | Mumbai
Coal India Limited
Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.9914.3 Crore (Enhanced from Rs.9550 Crore)
Long Term RatingCRISIL AAA/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
 
Corporate Credit RatingCCR AAA/Stable (Reaffirmed)
Rs.150 Crore Short Term DebtCRISIL A1+ (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AAA/CCR AAA/Stable/CRISIL A1+’ ratings on the bank facilities, corporate credit rating and short-term debt of Coal India Limited (CIL).

 

The ratings continue to reflect CIL’s strategic role in helping India meet its energy requirement, its near-monopoly status, healthy profitability and strong financial risk profile. These strengths are partially offset by susceptibility to regulatory risks and socio-political factors, and constraints in the coal distribution and evacuation infrastructure in India.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of CIL and its subsidiaries and joint ventures (JVs) to arrive at the ratings. CIL and all its subsidiaries are together referred to as CIL. This is because all these entities, collectively referred to as CIL, are under a common management and have strong business and financial linkages.

 

Please refer to Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Strategic importance in meeting India’s energy requirement: Given India's abundant coal reserves and non-availability of other sustainable sources of fuel, coal will continue to play a dominant role in meeting the country’s energy requirement. CIL accounted for 80% of domestic coal production in fiscal 2022. Total production by the company and offtake during the fiscal were 623 million tonne (MT) and 662 MT, respectively (596 MT and 574 MT, respectively, in the previous fiscal) out of which around 80% of its supplies were to the power sector.

 

  • Continued near-monopoly status: CIL possesses 48% of India’s proven reserves in its command area and accounts for the bulk of the domestic coal production. While the government has already started auctions for the commercial mining by private sector players (46 coal mines are auctioned till August 2022 under five tranches since November 2020), implementation is expected to take longer. Hence, CIL will continue to enjoy its monopoly over the medium term.

 

  • Healthy profitability: Favourable geological conditions and improving productivity in terms of output per man-shift through increased outsourcing and capital expenditure (capex) kept the operating margin healthy over the past decade. With highest ever production and offtake of 623 MT and 662 MT, respectively, and with operating profit before depreciation, interest and taxes (OPBDIT) margin at 23.1% in fiscal 2022, compared with 21% during the previous fiscal, CIL has reported highest ever OPBDIT of Rs 25,481 crore for fiscal 2022.

 

Offtake increased 11% in the first quarter of fiscal 2023, driven by power demand recovery. The OPBDIT margin further improved to 34% from 19% in the corresponding period of the previous fiscal, driven by larger volumes and higher e-auction premiums. With expected improvement in the power demand, volume and profitability should remain healthy over the medium term.

 

  • Strong financial risk profile: The financial risk profile is supported by low debt and high networth. Gearing remained strong at 0.08 time as on March 31, 2022 (0.16 time a year earlier) due to easing of working capital intensity during the year.

 

Liquidity remains robust with net cash and cash equivalent (C&CE)[1] of around Rs 32,000 crore as on March 31, 2022 (around Rs 15,000 crore last fiscal). Net C&CE significantly improved during fiscal 2022, as indicated mainly by increase in operating performance and ease of working capital intensity during the fiscal.

 

CIL will undertake annual capex of Rs 15,000-20,000 crore over the next three fiscals to increase mining and coal washing capacity and improve rail infrastructure. The company also plans to set up solar power and thermal power plants and revive fertiliser plants. While the investments in these sectors have been low till now, since the projects are in the preliminary stages, it may increase with the progress of the projects.

 

Despite the proposed capex and expected continuation of the dividends, the financial and liquidity risk profiles will remain strong over the medium term, backed by robust capital structure, sizeable liquid surplus and healthy cash accrual. Any larger-than-expected capex, adversely impacting cash position, will remain a key monitorable.

 

Weaknesses:

  • Exposure to socio-political and regulatory risks: Despite improving productivity, CIL’s coal output has been constrained by delays in obtaining environmental and forest approvals, especially in greenfield projects and lack of adequate logistic infrastructure. Flexibility is also restricted by socio-political factors, which mandate development activities in coal mining areas, thereby impacting the cost structure. CIL plays an important role in ensuring the country’s energy security, and domestic coal has a discounted price compared to imported coal. Private players entering the business under the commercial mining route will take time to start production, thus keeping CIL’s near-monopoly status and strategic importance to the Government of India. Operational flexibility has improved in the past few years with environmental and forest clearances enabling faster implementation of stuck projects for coal evacuation. Any change in the regulatory regime or socio-political factors will impact the business.

 

Furthermore, CIL has large contingent liabilities on account of claims related to environment clearances and taxes. Any materialization of these contingent liabilities leading to cash outflow, will remain a key rating sensitivity factor.

 

  •   Constraints in coal distribution and evacuation infrastructure: In the past, volume was hit by shortage of adequate rakes for transportation of coal and lack of last-mile connectivity in pitheads. Nonetheless, there has been progress in implementation of previously stuck projects, with better coordination among stakeholders. Out of 35 planned first mile connectivity projects, 6 projects having 82 MT capacity are completed. Out of these, three projects having 52 MT capacity got commissioned during fiscal 2022. Furthermore, CIL is focusing on improving the rail infrastructure in Odisha, Jharkhand and Chhattisgarh with various projects in the pipeline. Some of the rail projects remains very critical such as tripling of the Tori- Shivpur rail line that will increase the capacity to 3 times. Overall, these projects will ease evacuation constraints and increase the share of railways in transporting coal. Any delay in the completion of these links may impact the offtake.

 

[1] Net cash and cash equivalent is equal to cash and cash equivalent less total debt

Liquidity: Superior

Liquidity is backed by net cash and cash equivalent of around Rs 32,000 crore and unutilised fund-based working capital lines of Rs 4,250 crore as of March 2022. The annual cash accrual, existing cash and cash equivalent and unutilised bank lines should be adequate for meeting the debt obligation, capex and incremental working capital requirement during fiscal 2023.

Outlook: Stable

CIL will maintain its position in the domestic coal industry, driven by strong capital structure and surplus liquidity.

Rating Sensitivity factors

Downward factors

  •   Any material adverse impact of changes in India's coal policy
  •   Significant weakening of financial and liquidity risk profiles
  •   Materialisation of contingent liabilities significantly deteriorating the financial risk profile, especially liquidity
  •   Any divestment leading to substantial reduction of government shareholding to below 50%

About the Company

CIL was incorporated in 1973 as Coal Mines Authority Ltd after the nationalisation of the coal sector. It was reconstituted as a formal holding company with the present name in November 1975. CIL was conferred the Maharatna status by the Indian government in April 2011. The status provides operational and financial autonomy. Additionally, six of its eleven wholly owned subsidiaries have been accorded the Miniratna status, leading to decentralisation of operations and decision-making. In October 2010, the government divested 10% stake in CIL for Rs 15,200 crore through an initial public offering (IPO). After the IPO, CIL was listed on the domestic stock exchanges. Over the years, the government has divested stake through offer for sale, by way of placement of shares in Central Public Sector Exchange Traded Fund and buyback of shares through offer for sale. Government shareholding was 66.13% as on June 30, 2022.

 

In fiscal 2022 and the first five months of fiscal 2023, CIL produced 623 MT and 253 MT of coal, respectively, against 596 MT and 209 MT, respectively, in the corresponding period of the previous fiscal.

Key Financial Indicators (Consolidated)*

As on/for the period ended March 31   2022 2021
Operating income Rs crore 1,10,509 90755
Profit after tax (PAT) Rs crore 17378 12702
PAT margin % 15.7 14
Adjusted debt/adjusted networth Times 0.08 0.16
Interest coverage Times 52 29.61

* As per analytical adjustments made by CRISIL Ratings

 

CIL had PAT of Rs 8,834 crore and total income of Rs 36,087 crore in the quarter through June 2022, compared with Rs 3,174 crore and Rs 25,963 crore, respectively, for the corresponding period of the previous fiscal.

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of
instrument
Date of
allotment
Coupon
rate (%)
Maturity
date
Issue size
(Rs crore)
Complexity 
levels
Rating assigned
with outlook
NA Cash Credit & Working Capital Demand Loan NA NA NA 140 NA CRISIL AAA/Stable
NA Letter of credit & Bank Guarantee^ NA NA NA 4990 NA CRISIL A1+
NA Letter of credit & Bank Guarantee NA NA NA 290 NA CRISIL A1+
NA Foreign Exchange Forward NA NA NA 10 NA CRISIL A1+
NA Corporate Credit Rating NA NA NA - NA CCR AAA/Stable
NA Term Loan NA 5.97% Sep-43 364.3 NA CRISIL AAA/Stable
NA Proposed Working Capital Facility NA NA NA 4120 NA CRISIL AAA/Stable
NA Short-term debt NA NA 7-365 days 150 Simple CRISIL A1+

^Outside the consortium non-fund-based limit

Annexure – List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

Bharat Coking Coal Ltd

Fully consolidated

Strong financial and business linkages

 

Central Coalfields Ltd

Fully consolidated

Eastern Coalfields Ltd

Fully consolidated

Mahanadi Coalfields Ltd

Fully consolidated

Northern Coalfields Ltd

Fully consolidated

South Eastern Coalfields Ltd

Fully consolidated

Western Coalfields Ltd

Fully consolidated

Central Mine Planning & Design Institute Ltd

Fully consolidated

Coal India Africana Limitada

Fully consolidated

CIL Navikarniya Urja Limited

Fully consolidated

CIL Solar PV Limited

Fully consolidated

CIL NTPC Urja Private Ltd

Equity method

International Coal Ventures Private Ltd

Equity method

Talcher Fertilizers Ltd

Equity method

Hindustan Urvarak & Rasayan Ltd

Equity method

Coal Lignite Urja Vikas Private Ltd

Equity method

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST/LT 4634.3 CRISIL A1+ / CRISIL AAA/Stable   -- 01-10-21 CRISIL A1+ / CRISIL AAA/Stable 02-11-20 CRISIL A1+ / CRISIL AAA/Stable 04-06-19 CRISIL A1+ / CRISIL AAA/Stable CRISIL A1+ / CRISIL AAA/Stable
      --   --   -- 25-06-20 CRISIL A1+ / CRISIL AAA/Stable   -- --
Non-Fund Based Facilities ST 5280.0 CRISIL A1+   -- 01-10-21 CRISIL A1+ 02-11-20 CRISIL A1+ 04-06-19 CRISIL A1+ CRISIL A1+
      --   --   -- 25-06-20 CRISIL A1+   -- --
Corporate Credit Rating LT 0.0 CCR AAA/Stable   -- 01-10-21 CCR AAA/Stable 02-11-20 CCR AAA/Stable 04-06-19 CCR AAA/Stable CCR AAA/Stable
      --   --   -- 25-06-20 CCR AAA/Stable   -- --
Short Term Debt ST 150.0 CRISIL A1+   -- 01-10-21 CRISIL A1+ 02-11-20 CRISIL A1+ 04-06-19 CRISIL A1+ CRISIL A1+
      --   --   -- 25-06-20 CRISIL A1+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit & Working Capital Demand Loan 5 Bank of Maharashtra CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Kotak Mahindra Bank Limited CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Axis Bank Limited CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 UCO Bank CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 ICICI Bank Limited CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 HDFC Bank Limited CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Punjab National Bank CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Bank of Baroda CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Indian Bank CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Bank of India CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Union Bank of India CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 80 State Bank of India CRISIL AAA/Stable
Cash Credit & Working Capital Demand Loan 5 Canara Bank CRISIL AAA/Stable
Foreign Exchange Forward 10 State Bank of India CRISIL A1+
Letter of credit & Bank Guarantee 5 HDFC Bank Limited CRISIL A1+
Letter of credit & Bank Guarantee 5 Bank of Maharashtra CRISIL A1+
Letter of credit & Bank Guarantee 10 Kotak Mahindra Bank Limited CRISIL A1+
Letter of credit & Bank Guarantee 10 Bank of India CRISIL A1+
Letter of credit & Bank Guarantee 195 State Bank of India CRISIL A1+
Letter of credit & Bank Guarantee 5 Punjab National Bank CRISIL A1+
Letter of credit & Bank Guarantee 10 Bank of Baroda CRISIL A1+
Letter of credit & Bank Guarantee 10 Indian Bank CRISIL A1+
Letter of credit & Bank Guarantee& 4310 State Bank of India CRISIL A1+
Letter of credit & Bank Guarantee 5 Union Bank of India CRISIL A1+
Letter of credit & Bank Guarantee 10 Canara Bank CRISIL A1+
Letter of credit & Bank Guarantee 5 UCO Bank CRISIL A1+
Letter of credit & Bank Guarantee 10 ICICI Bank Limited CRISIL A1+
Letter of credit & Bank Guarantee 10 Axis Bank Limited CRISIL A1+
Letter of credit & Bank Guarantee& 680 ICICI Bank Limited CRISIL A1+
Proposed Working Capital Facility 3755.7 Not Applicable CRISIL AAA/Stable
Proposed Working Capital Facility 364.3 Not Applicable CRISIL AAA/Stable
Term Loan 364.3 HDFC Bank Limited CRISIL AAA/Stable

This Annexure has been updated on 28-Sep-2022 in line with the lender-wise facility details as on 05-Apr-2022 received from the rated entity.

& - outside the consortium non-fund-based limit

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Mining Industry
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Entities Based on Government Support
CRISILs Criteria for Consolidation

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Manish Kumar Gupta
Senior Director
CRISIL Ratings Limited
B:+91 124 672 2000
manish.gupta@crisil.com


Ankit Hakhu
Director
CRISIL Ratings Limited
B:+91 124 672 2000
ankit.hakhu@crisil.com


MITHUN VYAS
Manager
CRISIL Ratings Limited
B:+91 22 3342 3000
MITHUN.VYAS@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') that is provided by CRISIL Ratings Limited ('CRISIL Ratings'). To avoid doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, 'CRISIL Ratings Parties') guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee - more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html