Amid low e-auction realisations, Coal India Q4 net falls 38% to Rs 2,716 cr

Revenue showed almost nil growth for year to Rs 83,808 cr, while expenses rose 10% to Rs 74,890 cr

Government-owned Coal India had a 38 per cent fall in net profit for the quarter ended March 31, at Rs 2,716 crore. For all of 2016-17, the fall was 35 per cent, to Rs 9,266 crore.

Tepid power demand, falling realisations from e-auctions and striving to keep prices 18 to 20 per cent below international levels have been given as reasons. The fall is although the revenue from operations in the quarter increased by 8.6 per cent, to Rs 24,780 crore.

In the quarter, final one of 2016-17, apart from increase in expenses on contract labour, employee benefits and corporate social responsibility, provisioning of Rs 1,239 crore increased the cost under this overhead by 325 per cent, which pulled up total expenses by 23 per cent to Rs 22,358 crore.

"While expenses increased manifold, the company wasn't able to generate enough revenue to meet this expense," an analyst said.

Ravi Kataria, managing director at Investment Imperative Group, said: "Coal India has incurred mine development expenses, while it wasn't able to increase production to meet the target. It is one of the factors which strained the resources."

While analysts blame Central Coalfields Ltd to be the bane for Coal India to come up with a dismal bottomline performance (both for the entire fiscal year as well as the quarter) on account of increased capital outlay with reduced productivity,

Coal India officials said the provisioning was mainly to meet rising labour expenditure. "A large portion of the provisioning accounts for the NCW (National Coal Wage) agreement," an official said. Trade unions have been demanding a 50 per cent wage hike and negotiations are on.

Revenue showed almost nil growth for the year, to Rs 83,808 crore. While expenses rose 10 per cent to Rs 74,890 crore.

However, say officials, a 10 per cent hike in expenses shouldn't mean a 35 per cent fall in net profit. "E-auction price realisation was the primary culprit," said one.

During FY17, while it offered 94.23 million tonnes for e-auction as against 56.31 mt during 2015-16, net realisation per tonne declined from Rs 1,858 to Rs 1,536. "This fall severely affected the bottom line," said another company official.

E-auction prices are usually 20 per cent higher than notified coal prices and play an important role in ensuring profit growth.

Beside, Kataria said, production volume grew only 2.9 per cent to 554.13 mt, against the target of 598.61 mt. It could sell 543.16 mt.

During the year, Coal India had revised prices of its grades, hoping for at least six per cent higher realisations as international prices fluctuated. However, offtake didn't pick up as expected.

The stock closed 0.3 per cent down at Rs 267.65 on the BSE exchange.