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					COAL INDIA LTD. (CIL)
                    BSE CODE: 533278

                    NSE CODE: COALINDIA

                    EQUITY (FV `10): ` 6316 Crs

                    MCAP: ` 194,733 Crs

                    CMP (07/01/11): ` 308.30

                    RECOM: BUY

                    TGT: `407
Company Background

 World’s largest Coal company in terms of Production and Reserves.

 Total Coal Resources ~64.8 billion tons (BT)
  Extractable reserves ~21.8 BT (April’10)

 Produced 431.26 million tons (MT) of raw coal in FY10.

 Contributes ~80% to India’s coal output.

 Operated 471 mines in 21 major coalfields incl. 163 open cast (OC)
  mines, 273 underground (UG) mines and 35 mixed mines (March’10).
Corporate Structure

                                                              President of India



                                                                         90%


                                                             Coal India Ltd. (CIL)




              100%        100%         100%          100%                100%           100%           100%         100%        100%


   Central           Eastern      Northern     South              Western          Mahanadi      Central      Bharat       Coal India
   Mine              Coalfield    Coalfields   Eastern            Coalfields       Coalfields    Coalfields   Coking       Africana
   Planning &        Ltd. (ECL)   Ltd. (NCL)   Coalfields         Ltd. (WCL)       Ltd. (MCL)    Ltd. (CCL)   Coal Ltd.    Limitada
   Design                                      Ltd. (SECL)                                                    (BCCL)       (CIAL)
   Institute
   Ltd.
   (CMPDIL)




                                                                   MJSJ Coal                    MNH Shakti
                                                                   India Ltd.                   Ltd. (70%)
                                                                   (60%)
Reserves
                                                                 (in billion tons)
  Coalfields                          Coal Resources       Extractable Reserves
  Korba                                             5.55                     2.67
  Singrauli                                         3.48                     1.89
  Talcher                                           9.93                     5.89
  IB Valley                                         3.40                     2.12
  Wardha Valley                                     2.92                     0.80
  Jharia                                            7.04                     1.15
  North karanpura                                   4.49                     2.07
  Central India Coalfields                          3.68                     0.77
  Raniganj                                          9.18                     0.66
  Rajmahal/Deogarh                                  2.34                     0.55
  East Bokaro                                       3.23                     0.69
  West Bokaro                                       1.76                     0.46
  Kamptee                                           0.94                     0.21
  Mand Raigarh                                      2.07                     0.66
  Umrer Nand Bander                                 0.56                     0.22
  South Karanpura                                   1.75                     0.31
  Pench-kanhan                                      0.94                     0.15
  Pathakhera                                        0.22                     0.09
  Makum                                             0.36                     0.24
  Ramgarh                                           0.41                     0.14
  Giridh                                            0.02                     0.02
  Coalfields currently not under production
  Daltonganj                                        0.02                     -
  Hutar                                              -                       -
  Tatapani-ramkola                                  0.48                     -
  Dilli-Jeypore                                     0.02                    0.01
  Total                                           64.79                    21.75
Product Mix
  Produces Raw Coal and Beneficiated coal.
                 FY10 Coal Production Raw Coal Prodn
    Beneficiated
       Coal
        6%                             Coking Coal 8%
                                       Non-Coking Coal 92%

                                     Beneficiated Coal Prodn
                                      Coking Coal 20%
                     Raw Coal
                       94%
                                      Non-Coking Coal 80%

  Primarily sells E & F grade coal accounting for 25.5% and 42.3% of
   total sales in FY10 respectively, while A, B & C grade coal accounts for
   1%, 6% & 9% respectively.
Pricing
  Coal Prices deregulated in India since 2000

  Sells Raw coal under
  - Long-Term Fuel Supply Agreements (FSAs) wherein price determined in
    contract

  - E-Auction (10% of production to be sold under this method and Price
    determined based on prevailing market price)

  Higher Quality Non-coking coal (Grades A, B & C) prices fixed at 15%
   discount to prevailing landed cost of quality imported coal.
Pricing
                       Price Range (` per ton)
Coal Grades
                        wef 16 October 2009
Non-Coking Coal
A                               `1280 to `2380
B                               `1130 to `2120
C                                `950 to `1860
D                                `790 to `1610
E                                `620 to `1090
F                                 `480 to `870
G                                 `350 to `700
Coking Coal
Steel Grade I                              `3750
Steel Grade II                             `3140
Washery Grade I                 `1710 to   `2740
Washery Grade II                `1410 to   `1990
Washery Grade III               `1200 to   `1480
Washery Grade IV                `1120 to   `1370

Others (SC-I/II/SLV)            `1450 to `2150
Key Investment Positives

 Lowest cost coal producers globally on account of high share (~90%)
  from OC mines. Average cost $16/ton v/s global $33/ton

 Lower weighted average strip ratio of 1.9 for 17 major OC mines
  which accounted for 49% of FY10 production

 Sells Coal at 55-60% discount to global prices. ASP in FY10 $23/ton and
  in H1FY11 $26/ton

 Share of Beneficiated Coal sales (in value terms) to increase from
  current ~7% (FY10) to ~40% by FY18
Key Investment Positives

 High cash balances of over `50,000 Crs

 Introduction of modern mine planning technologies for UG mines &
  deep OC mines to bring in operational & cost efficiencies.

 Expansion in key user industries like steel, cement & power to drive
  demand for coal.

 Plans to import ~250 MT of coal over next 10 years. Shortlisted 21
  global companies for same.

 India’s coal shortfall expected at 83 MT in FY11E.
Strip ratio of Major Mines
 Coal Field                 Name of Mine     Strip ratio
                            Gevra                  1.27
 Korba                      Dipka                  1.00
                            Kusmunda               1.42
                            Jayant                 2.60
                            Dudhichua              3.29
 Singrauli
                            Nigahi                 3.76
                            Amlohri                4.30
                            Lingaraj               0.71
 Talcher                    Ananta                 2.20
                            Bharatpur              0.89
                            Lakahnpur              2.34
 IB Valley
                            Samleshwari            2.24
                            Padampur               4.00
 Wardha Valley
                            Niljai                 3.13
                            Muraidih               1.27
 Jharia                     Block-II               4.49
                            Moonidh                 -
                            Piparwar               0.75
 North karanpura            Ashoka                 1.31
                            K.D.Hesalong           1.19
                            Churcha RO              -
 Central India Coalfields   Chirimiri OC           3.75
                            Dhanpuri OC            5.05
 Raniganj                   Sonepur Bazari         5.19
 Rajmahal/Deogarh           Rajmahal               2.00
 East Bokaro                -                      1.71
Capacity Expansion

 Plans to expand raw coal production by 50% from 431MT in FY10 to 647 MT
  in FY18

 Plans to restart mining operations at 18 abandoned UG mines

 Investment approval for 77 projects with proposed capacity expansion of
  184.78 MTPA of coal with estimated capex of `110 bn. Of the above

 - 32 projects with capacity 104MTPA already implemented by March 2010

 - 25 projects with capacity of 47.51 MTPA, estimated capex `33.9 bn
  expected to be operational by FY12

 - 20 projects with capacity of 33.27 MTPA, estimated capex `25.8 bn
  expected to be operational during XII plan (FY13-18)
Capacity Expansion

 Currently has 17 coal beneficiation plants with installed capacity of
  39.5 MTPA

 Plans to add 20 new coal beneficiation facilities with aggregate
  capacity of 111.1 MTPA

 Also proposed to set up dedicated beneficiation facility for all new OC
  mines with rated mining capacity greater than 2.5 MTPA

 Approved proposal to buy 16 dumpers of 240 ton each from Bucyrus,
  US for `524 Crs

 Approved purchase of other heavy earthmoving equipments worth
  `400 Crs for OC mining projects
Acquisitions

 Earmarked `6000 Crs towards overseas acquisitions.

 Considering to buy participative stake in

     US based Sydney Complex, an arm of Massey Energy for $1 billion
     - Sydney Complex based in Central Appalach
     - Includes 8 UG mines

     Australian Mine owned by Peabody (US based company)
     - Wilkie Creek Mine based in Queensland
     - Looking for 10-15% stake in it
     - Produces 2.35 MTPA coal used in power plants
Acquisitions

 Considering to buy participative stake in

     Indonesia Sinar Mas Group
     - Mines located in island-nation

 Considering 2nd indicative bid for Colombian Assets of US Miner
  Drummond Co.

 Acquired licenses for developing 2 coal blocks in Mozambique in
  August 2009
 Joint Ventures (JVs)

 Signed Memorandum of Understanding (MoU)            with   Shipping
   Corporation of India (SCI) to form 50:50 JV
 - JV to provide logistics services for coal import

 Signed JV with NTPC to develop the Brahmini & Chichro Patsimal coal
  mining blocks in Eastern India.

 Considering JV with Nuclear Power Corporation (NPC) for nuclear
  power

 Mulling JV with NMDC & West Bengal Mineral development and Trading
  Co. to acquire one of the largest coal block with reserves of ~19
  billion tonnes.
Half Yearly Results


 Net Sales ↑ 17% YoY at `22525.5 Crs v/s `19269.5 Crs (on back of 11%
  price rise in October’09 and 25% increase in e-auction & washed coal
  prices)

 Net Profit ↑ 29% YoY at `4020.4 Crs v/s `3115.0 Crs

 Realisation ↑ 13.5% YoY at `1180/ton ($26/ton)

 Coal production ↑ 0.7% at 185.7 MT v/s 184.4 MT

 Sales Volume ↑ 2.94% at 200 MT
Concerns

 Ministry of Environment & Forest (MoEF) Moratorium on development
  of projects in 43 polluted industry clusters

 CIL mines included under No-go classification areas are Singrauli,
  north Karanpura, IB Valley, Mandraigarh, Talcher, Sohagpur, Wardha
  Valley & Hasdeo Arand

 FY11E output to fall short by 16MT from targeted production of 460MT

 8 coal blocks under MoEF’s CEPI (Comprehensive Environmental
  pollution Index) scanner

 17 greenfield projects with potential capacity of 101 MT awaiting
  environment and forest clearance.
Financials

         65,000                                                                   24%



         55,000                                                                   19%
 ` Crs




         45,000                                                                   14%



         35,000                                                                   9%



         25,000                                                                   4%
                  FY06   FY07     FY08      FY09     FY10    FY11E        FY12E



                    Revenue     EBITA Margin (RHS)     PAT Margin (RHS)
Financials
Rating – “BUY”         Return- 32%




          Target Price- `407
          Based on FY12E EPS
          Target P/E multiple of
          20x
Thank You
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information contained in this document has been taken from publicly available information, trade and
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reliable, we do not hold ourselves responsible for its completeness and accuracy. All opinions and estimates
included in this report constitute our judgement as of this date and are subject to change without notice.
Investors are expected to use the information contained in this report at their own risk. This report is not and
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position in the securities of companies discussed herein and may sell them to or buy them from customers on
a principal basis.

				
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