1. Offer for sale | Mining
October 14, 2010
Coal India SUBSCRIBE
Issue Open: October 18, 2010
Co(a)llateral growth Issue Close*: October 20, 2010
Coal India (CIL), a Navratna company, is the world’s largest coal producer. Note:*Closes on October 21, 2010, for non-QIB bidders
The company accounts for nearly 82% of India’s total coal production. At the
lower and upper price band, the stock will trade at 5.8x and 6.7x FY2012E Issu e D eta ils
EV/EBITDA, respectively. We recommend Subscribe to the issue with a DCF-based Face Value: `10
fair value of `294.
Present Eq. Paid up Capital: `6,316.4cr
Enjoys largest reserves and production base: CIL has the world’s largest coal
Offer Size*: 63.2cr shares
reserves, at 19bn tonnes, as per JORC’s guidelines. The company’s proved
reserves stand high at 11bn tonnes, constituting 56.2% of its total reserves. CIL, Post Eq. Paid up Capital: `6,316.4cr
the biggest coal producer globally, produced 431mn tonnes of coal in FY2010.
Issue size**: `14,212-15,475cr
Demand outpacing supply: We expect CIL’s coal production to grow at a 5.7%
Price Band: `225-245
CAGR over FY2010–15E. However, India will continue to be a net importer of
coal as domestic demand is likely to grow at a 9–10% CAGR over FY2010–15E. Promoters holding Pre-Issue: 100%
Significant leeway to increase prices: CIL sells raw coal at a ~63% discount to Promoters holding Post-Issue: 90%
global prices. We expect blended realisations to increase at a 6.1% CAGR over No te:*1 reserved fo r emplo yees;
0%
FY2010–15E on account of a) a 5.1% CAGR increase in raw coal’s notified price **A t the lo wer and upper price band, respectively,
with 5% disco unt to emplo yees and retail investo rs
over FY2010–15E, b) increased proportion of beneficiated coal sales (8.8% in
FY2015E v/s 3.7% in FY2010), which commands a ~120% premium over the
notified coal price and c) gradual increase in e-auction sales volumes from 11.6% B oo k B u ildin g *
in FY2010 to 12.5% in FY2012E, where realised price is likely to be ~60% higher QIBs At least 50%
than the notified price.
Non-Institutional At least 15%
Competitive cost structure: CIL is one of the lowest-cost coal producers in the
Retail At least 35%
world, with an average blended cost of US $16/tonne. This is because CIL’s
No te:*B ased o n net o ffer
production from open cast mining, which has significantly lower production cost
(US $11/tonne), accounts for 90% of its total production cost as compared to Po st Issu e Sh areh o ldin g Pattern (%)
underground mining, which has a high production cost of US $59/tonne.
Promoters Group 90
Key risks to CIL’s earnings and our estimates: 1) Regulatory hurdles causing a MF/Banks/Indian
delay in production ramp-up; 2) infrastructure bottlenecks; 3) amendments in the FIs/FIIs/Public & Others 10
mining policy, which require sharing of profits; and 4) ongoing environmental
debate on ‘Go/No Go’ regions.
We will be releasing a detailed report shortly.
Key financials (Consolidated)
Y/E March (` cr) FY2009 FY2010 FY2011E FY2012E
Net sales 40,811 46,684 50,183 55,971
% chg 17.9 14.4 7.5 11.5
Net profit 4,063 9,834 10,518 12,712
% chg (5.2) 142.1 7.0 20.9
EPS (`) 6.4 15.6 16.7 20.1
EBITDA (%) 6.0 22.0 23.5 26.7 Paresh Jain
P/E (x) 38.1 15.7 14.7 12.2 +91 22 4040 3800 Ext: 348
P/BV (x) 8.1 6.0 4.7 3.7 pareshn.jain@angeltrade.com
RoE (%) 22.4 43.8 35.7 33.8
Pooja Jain
RoCE (%) 3.6 34.5 31.1 32.1
+91 22 4040 3800 Ext: 311
EV/Sales (x) 3.1 2.5 2.2 1.8 pooja.j@angeltrade.com
EV/EBITDA (x) 51.7 11.5 9.3 6.7
Source: Company, Angel Research; Ratio calculated at the upper price band
Please refer to important disclosures at the end of this report 1

2. Coal India | Offer for sale
Exhibit 1: Relative valuation
Market Cap PE Ratios (x) EV/EBITDA (x)
Company (US $mn) CY09/FY10 CY10/FY11 CY11/FY12 CY09/FY10 CY10/FY11 CY11/FY12
Arch Coal 4,376 61.8 24.0 10.7 12.4 8.2 5.4
CONSOL Energy 9,061 13.8 15.9 11.0 7.9 8.7 6.1
Peabody Energy 13,935 30.3 17.1 11.5 12.6 8.4 6.0
Massey Energy 3,731 31.6 88.2 10.2 9.3 10.9 4.7
International Coal Group 1,233 35.2 23.7 11.3 8.4 7.7 5.2
Centennial Coal Co. 2,440 41.8 16.2 12.9 15.2 7.6 6.5
Coal & Allied Ind. 9,664 23.5 17.6 11.7 13.7 11.5 6.6
Gloucester Coal 1,370 17.4 15.1 9.7 18.9 10.4 6.0
MacArthur Coal Ltd. 3,856 26.8 13.8 11.0 16.7 8.8 7.0
New Hope Corp. Ltd. 4,389 23.0 21.9 20.2 14.4 10.7 10.0
Whitehaven Coal Ltd. 3,127 58.3 29.0 15.3 28.7 16.5 8.9
Western Coal Corp. 2,313 55.8 8.0 5.8 23.5 5.7 3.8
Adaro Energy Tbk 7,887 15.7 20.9 13.0 7.0 8.3 5.8
Tambang Batubara
5,294 16.2 19.7 13.8 10.7 13.5 8.7
Bukit Asam Tbk PT
Banpu PCL 6,689 13.9 12.0 10.9 12 12.5 7.5
Coal India*@`225 31,580 14.5 13.5 11.2 10.2 8.2 5.8
Coal India*@`245 34,387 15.7 14.7 12.2 11.5 9.3 6.7
Average (x) 31.0 21.9 11.9 14.1 10.0 6.6
Source: Bloomberg; Note: *Angel estimates
Exhibit 2: Key assumptions
(mn tonnes) FY2011E FY2012E
Raw coal sales volume – Linkage 370.7 385.3
E-auction coal sales volume 50.6 55.0
Beneficiated coal sales volume 15.3 19.1
(`/tonne)
Average blended realisation 1,149 1,218
Staff cost 415 405
Source: Angel Research
October 14, 2010 2

3. Coal India | Offer for sale
Research Team Tel: 022 - 4040 3800 E-mail: research@angeltrade.com Website: www.angeltrade.com
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October 14, 2010 3

4. Coal India | Offer for sale
Address: Acme Plaza, ‘A’ Wing, 3rd Floor, M.V. Road, Opp. Sangam Cinema, Andheri (E), Mumbai - 400 059.
Tel: (022) 3952 4568 / 4040 3800
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Fundamental:
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Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angelbroking.com
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Paresh Jain Metals & Mining pareshn.jain@angelbroking.com
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John Perinchery Capital Goods john.perinchery@angelbroking.com
Srishti Anand IT, Telecom srishti.anand@angelbroking.com
Jai Sharda Mid-cap jai.sharda@angelbroking.com
Sharan Lillaney Mid-cap sharanb.lillaney@angelbroking.com
Naitik Mody Mid-cap naitiky.mody@angelbroking.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angelbroking.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angelbroking.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angelbroking.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angelbroking.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angelbroking.com
Yaresh Kothari Research Associate (Automobile) yareshb.kothari@angelbroking.com
Shrinivas Bhutda Research Associate (Banking) shrinivas.bhutda@angelbroking.com
Sreekanth P.V.S Research Associate (FMCG, Media) sreekanth.s@angelbroking.com
Hemang Thaker Research Associate (Capital Goods) hemang.thaker@angelbroking.com
Nitin Arora Research Associate (Infra, Real Estate) nitin.arora@angelbroking.com
Technicals:
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Derivatives:
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October 14, 2010 4