Coal India Ltd

• Bonds programme - Rs. 80 crore Rating : AA
• Bonds programme - Rs. 433 crore Rating : Upgraded from AA- to AA
• Short term debt programme  Rating : P1+ (reaffirmed)

Crisil has assigned an "AA" rating to Coal India Ltd''s proposed Rs. 80-crore bond programme. The "AA-" rating assigned to CIL''s Rs. 433 crore bonds issue has been upgraded to "AA". The "P1+" rating assigned to CIL''s Rs. 300-crore  short term debt programme has been reaffirmed.

The upgrade in rating reflects CIL’s comfortable financial position, improvements in its operating efficiency and the expected positive effect on the company''s cash flows of the proposed securitisation of its receivables from state electricity boards. The rating also factors in the continuation of CIL’s near monopoly position in the coal sector and a favourable demand-supply position, CIL’s abundant coal reserves, and its established infrastructure and strong linkages with a majority of existing users.

However, these strengths are partly offset by the increased price competitiveness of imported coal, the company’s high manpower levels, large exposure to SEBs and unfunded gratuity and pension liabilities. The rating also factors CIL’s ownership by the government of India and the continuation of support by the government.

CIL is the apex body in the Indian coal industry, and has eight fully-owned subsidiaries, namely -- Eastern Coalfields Ltd., Bharat Coking Coal Ltd., Central Coalfields Ltd., Western Coalfields Ltd.,  Northern Coalfields Ltd., South Eastern Coalfields Ltd., Mahanadi Coalfields Ltd., and the Central Mine Planning and Design Institute Ltd. Seven of these organisations are engaged in mining activities. While all eight subsidiaries are independent corporate entities, vested with operational responsibilities, CIL discharges its functions as the apex body and holding company responsible for fund mobilisation and overall management of the subsidiaries.

Crisil considers CIL and its subsidiaries as a single consolidated entity for the purpose of evaluating the risk profile. During the financial year 1998-99, CIL and its subsidiaries generated a consolidated operating income of Rs. 15,985 crore and consolidated post-tax profit of Rs. 508 crore.