Coal India unlocks unlimited coal supply for power plants; Stock rises

Shares of state-owned Coal India Ltd (CIL) surged 1.3% to ₹528 apiece on Wednesday after it permitted thermal power plants including independent power plants (IPPs) or privately owned units to procure coal beyond annual contracted quantity (ACQ). This allows power plants with fuel supply agreements (FSA) to acquire as much coal as they require, marking a shift from the earlier system where coal was supplied based on an annual contracted quantity (ACQ) agreed upon with each plant.

At the time of reporting, shares of CIL were trading at ₹524.20, up 0.56% from the previous closing price of ₹521.30. The stock opened higher at ₹522.35, in sync with the strong broader market. The company’s market cap stood at ₹3,23,050.22 crore.

The stock surged 5.36% over the past month, jumped 12.46% in the past six months, and increased 37.36% year-to-date (YTD).

CIL in an exchange filing said that the policy change applies to Gencos which have signed the FSAs that include such an enabling clause.

Previously, CIL allowed power plants and IPPs to receive up to 120% of their ACQ. CIL's board had already approved this removal of supply caps beyond the ACQ in the last week of June to simplify operations and avoid duplicity of work. “CIL’s pitheads currently have a coal stock of 72 million tonnes (MTs) which is 47% more compared to 49 MTs as of 12 August 2023,” the national miner states.

In 2023-24, CIL supplied 101.6% of the projected coal demand, marking a 5.4% increase over the previous year. Out of 153 domestic coal-based power plants in the country, CIL has established long-term linkages with 127 plants, accounting for 592 million tonnes. Among the 54 domestic coal-based IPPs, CIL has linkages with 50, covering 155.7 million tonnes per annum, CIL adds.

During the earnings call post Q1 FY25, CIL reported a net profit of ₹10,959 crore, reflecting a 4.1% year-on-year (YoY) increase. Compared to the previous quarter, net profits attributable to the company's owners grew at a rate of 26.2%. Meanwhile, net income rose by 2.2% to ₹38,349.21 crore in Q1, up from ₹37,521.03 crore in Q1 FY24.

Moreover, EBITDA (Earnings, Before, Interests, Taxes, Depreciation, Amortisation) for the public sector utility reached ₹14,339 crore in the April - June quarter, with margins at 39.3%.