CIL aims to join big league of min­ers

PSU ma­jor di­ver­si­fies into met­als and aims to po­si­tion it­self as a holis­tic en­ergy com­pany

Business Standard - - COMPANIES - AVISHEK RAKSHIT

Coal In­dia’s de­ci­sion to re­po­si­tion it­self as a holis­tic en­ergy en­tity and har­ness its strength in min­ing by di­ver­si­fy­ing into met­als will place the gov­ern­ment-owned ma­jor in the big league of global min­ers such as Glen­core, Rio Tinto, BHP, and Vale.

A con­sul­tant has been hired to do a study on how the com­pany can mod­ernise and adapt to cur­rent trends.

The met­als min­ing move will also help it hedge against the im­pact of re­new­able en­ergy. As In­dia, in line with other coun­tries, moves to­wards ‘clean’ and re­new­able en­ergy, the de­pen­dence on ther­mal power would de­cline. This means less de­mand for coal. Coal In­dia it­self es­ti­mates the share of coal in com­mer­cial en­ergy sup­ply would go down from 55 per cent in 2015-16 to 48-54 per cent by 2040.

“Hence, it is nat­u­ral for a com­pany solely de­pen­dent on coal sales to branch out and di­ver­sify into min­ing of other met­als, where de­mand is likely to re­main sta­ble,” says Partha Bhat­tacharyya, past chair­man of Coal In­dia.

Around 175 Gw of re­new­ables is pro­jected to be added to the coun­try’s en­ergy land­scape by 2022. To­tal re­new­able en­ergy ca­pac­ity is ex­pected to be 350 Gw by 2030. De­clin­ing rates for so­lar and wind power, now ~2.96 and ~3.64 a unit, re­spec­tively, will help in pop­u­lar­is­ing th­ese sources. It is pro­jected that around 60 per cent of In­dia’s en­ergy needs will be sourced from re­new­ables by 2040.

An­other for­mer chair­man of Coal In­dia, who wanted to not be named, said the com­pany needed to chart its own growth ter­ri­tory and find pos­si­bil­i­ties to stay rel­e­vant.

“First, it needs to be seen what the al­ter­na­tives are. Met­als min­ing is an ob­vi­ous choice, given Coal In­dia's ex­per­tise. It also opens a new rev­enue stream. There is no doubt that re­new­ables are gain­ing promi­nence and Coal In­dia has to con­sider it while for­mu­lat­ing its long-term goals,” he said.

Added Bhat­tacharyya: “It is a mean­ing­ful di­ver­si­fi­ca­tion Coal In­dia has un­der­taken. Glob­ally, min­ing com­pa­nies have a pres­ence in coal, iron and sev­eral other min­er­als. Now, Coal In­dia might also join the league.” How­ever, the move will also re­sult in con­sid­er­able in­vest­ment by the com­pany and mar­ket an­a­lysts be­lieve if Coal In­dia funds the new metal min­ing line from its own re­serve of ~32,000 crore, div­i­dends and cash flow could be hit in the near term.

“If Coal In­dia doesn’t re­vise prices, its cash flow will be in the range of ~10,000-12,000 crore per an­num and re­serves will go down. Thus, it will not be able to pay hefty div­i­dends like be­fore,” said Ru­pesh Sankhe, re­search an­a­lyst with Re­liance Se­cu­ri­ties.

Coal In­dia of­fi­cials are bullish on the pro­posed ven­ture and are not bent on get­ting a part­ner for the met­al­lur­gi­cal min­ing foray. “If we can mine the iron on our own, why not sell it di­rectly on our own? There are few suc­cess sto­ries in joint ven­tures,” a com­pany of­fi­cial said. The ba­sic prin­ci­ple in min­ing of iron ore or other met­als is sim­i­lar to that in coal, added the of­fi­cial.

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