Coal India's rating downgraded

The AA (double A) ratings assigned to the Rs. 433 crore bond programme and the Rs. 80 crore bond programme of Coal India have been downgraded to AA minus. The P1 plus rating assigned to the Rs. 300 crore short term debt programme has been reaffirmed.

The downgradation in rating factors in the expected reduction in operating margins of CIL on account of higher than expected revision in wages for employees as well as the high wage arrears liability due to implementation of new wages with retrospective effect.

The rating is supported at the current levels by CIL's near monopoly position in the coal sector, its abundant coal reserves, established infrastructure, strong linkages with majority of the existing users and the improvements in CIL's operating efficiency. The rating also factors in CIL's ownership by the Government and the continuation of support by the Government.

However, these strengths are partly offset by the increased price competitiveness of imported coal, the company's high manpower base and the huge financial burden on account of revision in employee salaries, high exposure to State electricity boards (SEBs) and unfunded gratuity and pension liabilities.

CIL is the apex body in the Indian coal industry, having eight fully owned subsidiaries, namely, Eastern Coalfields (ECL), Bharat Coking Coal (BCCL), Central Coalfields (CCL), Western Coalfields (WCL) Northern Coalfields (NCL), South Eastern Coalfields (SECL), Mahanadi Coalfields (MCL) and Central Mine Planning and Design Institute (CMPDIL), seven of which are engaged in mining activities.

While each of the eight subsidiaries are independent corporate entities, vested with operational responsibilities, CIL discharges its functions as the apex body and holding company responsible for funds 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 1999-2000, CIL and its subsidiaries generated a consolidated operating income of Rs. 17,021 crores with a consolidated post-tax loss of Rs. 150 crores.

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Section  : Business
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