At 40.1mt/42.5mt, Coal India’s (CIL’s) production/offtake in April 2016 was down 3.4%/2.5% y-o-y, respectively. This represents the weakest start to a fiscal year since FY11 and the first month of y-o-y decline in both production and offtake since January 2015. The y-o-y drop in output in April 2016 comes on the back of the muted y-o-y output growth in the previous two months (average daily production/offtake was up 2.6%/1.8% y-o-y in February 2016 and 3.4%/3.4% y-o-y in March 2016). For FY16, CIL’s production/offtake grew 8.6%/8.8%, respectively.
Three subsidiaries reported a double-digit y-o-y decline in production/offtake in April – ECL (down 20%/10% y-o-y), CCL (down 15%/21% y-o-y), and WCL (down 22%/13% y-o-y). The only bright spot was MCL, which posted a 10.5% y-o-y growth in offtake during the month. In our view, the drop in volumes is primarily on the back of sluggish demand from the power sector (abundant coal inventory) and non-power consumers (CIL’s high-grade coal is not competitively priced vs. landed cost of comparable imported coal at the port). As has been the case historically, CIL liquidated coal inventory in April; coal inventory stood at 56.1mt as of April 2016 (vs. 58.4mt as of March 2016).
In respect of the monthly output targets specified in its MoU with the GoI, April 2016 production/offtake shortfall was 9.9%/17.5%, respectively—this is the biggest miss since October 2013.
