One problem that Coal India Ltd has is that its staff costs are high. The employee expenses of the state-owned coal producer as a percentage of operating income is about 35%. This is the company’s largest operating expense.
To deal with this to some extent, it has reduced its staff. “The company was able to partially offset the impact of large five-year wage hikes by reducing headcount by 39% over FY11-23 (-4% compound annual growth rate),” Jefferies India analysts said in a report on 21 November. Coal India expects an annual reduction of about 5% in the number of employees over the next ten years as well, the brokerage added.In FY23, Coal India’s employee count was around 239,000.
In a recent investor call, the company’s management said that it expects staff cost in FY24 to be around Rs46,000 crore. In FY23, employee expenses stood at Rs49,409 crore. The company made salary provisions of Rs 8,153 crore in the last financial year with a large chunk (worth Rs 5,870 crore) made in Q4FY23, which impacted profit during the quarter. “However, settlement of wages was only formally completed in Q1FY24 and accordingly, wages for Q1FY24 were also raised by Rs12,027 crore (up 19% YoY),” said a Kotak Institutional Equities report. All in all, in half. year ending September (H1FY24), Coal India’s employee expenses stood at Rs23,673 crore, up 13% year-on-year.
Of course, the company also takes other measures to control its operating costs. “Coal India has also implemented various other cost control measures such as closure of unviable, especially underground, mines and digitization of mines to increase capacity utilization,” the Jefferies report said.