Report Published as on 2nd August 2024
| Ticker | COAL |
| Company Name | Coal India Ltd |
| Shariah Compliance | PASS |
| DP-Ratio | 2.38% |
We have conducted a comprehensive review on Coal India Ltd from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.
Coal India Ltd (CIL). is mainly engaged in mining and production of Coal and operates Coal washeries. Backed by the Indian government’s Ministry of Coal, CIL holds the prestigious “Maharatna” status, signifying its potential to become a global giant. The “Maharatna” status grants CIL special privileges from the Indian government, enabling them to expand their operations and compete on a global scale. The power and steel sectors are their primary consumers, while cement, fertilizer, and brick kiln industries also rely heavily on their products.
Spanning across 83 mining areas in eight states, CIL is a major contributor to India’s energy security and economic development. Headquartered in Kolkata, they fulfill a staggering 79% of the country’s coal needs. CIL stands tall as the world’s largest coal producer and a top employer in India, boasting a workforce of over 228,000 (as of April 1, 2024).
The company derives revenue mainly from the following segments namely:
- Coal Sales: This is their primary revenue stream, recognized upon delivery or transfer of control of the coal to the customer.
- Coal Washing Services: Processing coal for customers might generate separate revenue based on the service agreement.
- Power Generation: Revenue from power generation (including renewable energy) would likely be recognized when the electricity is delivered to the customer.
Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:
Operating Revenue: (In INR Crore) for the year ended 31std March 2023
| Segments | Revenue | Non-Permissible Revenue | % of non-Permissible Revenue | Non-Permissible Segment Classification | Comments |
| Coal Revenue | 127,607.70 | – | – | – | – |
| Others | 19.77 | – | – | – | – |
| Other Operating Revenue | 10,624.44 | – | – | – | Including, Loading and additional transportation charges, Evacuation Facility Charges and consultancy and other services |
| Total | 138,251.91 | – | – | – | – |
Segment Breakup
Coal revenue: This is the core of coal revenue, generated by selling mined coal to various industries.
Coal Processing Services (Others): Some companies might process raw coal through washing or other methods to improve its quality.
Tricky Areas From a Shariah Perspective
CIL is a significant contributor to India’s development. They are the world’s largest coal producer, ensuring reliable energy for essential infrastructure and industries like steel, cement, and fertilizer (essential for food production). This aligns with Shariah’s emphasis on social well-being.
Based on the above information, it is safe to assume that the business operations of Coal India Ltd., would be Shariah Compliant
Let’s have a look at the non-operating income of the company
Non-operating revenue of the company: (In INR Crore) for the year ended 31std March 2023
| Segments | Revenue | Non -Permissible Revenue | % Non -Permissible Revenue | Non -Permissible Classification | Comments |
| Interest Income | 3,069.09 | 3,069.09 | 100% | Interest Income | – |
| Profit on Sale of Assets | 28.13 | – | – | – | – |
| Gain on Sale of Mutual Fund | 338.35 | 338.35 | 100% | Mutual Fund | – |
| Lease Rent | 39.28 | – | – | – | – |
| Miscellaneous Income | 1,410.05 | – | – | penalty recovered from Customer and Contractor | – |
| Total | 4,884.9 | 3,407.44 | 69.75% | – | – |
It is clear from the table above that the non-operating income of the company includes interest income and Gain on Sale of Mutual Fund which is Shariah not compliant. Interest income, as shown in the table, is factored into calculating both Sector Compliance and Dividend Purification.
Sector Compliance Calculation:
| Revenue Description | (In INR Crore) |
| Total Revenue | 143,406.81 |
| Non-permissible operating revenue | 0 |
| Interest Income | 3,069.09 |
| % of non-permissible revenue | 2.14% |
| Sector Compliance | PASS |
Dividend Purification Calculation:
| Revenue Description | (In INR Crore) |
| Non-permissible operating revenue | 0 |
| Non-permissible non-operating revenue | 3,407.44 |
| Total Non-permissible revenue | 3,407.44 |
| Total Revenue Of The Company | 143,406.81 |
| Dividend Purification Ratio | 2.38% |
Financial Ratio Screen:
(All figures in INR Millions for the Quarter ended 31ST March 2024)
| Amount | Remarks | |
| 3 years Average Market | 1556639 | – |
| Total Debt | 65230.3 | – |
| Islamic Debt | 0 | – |
| Adjusted Debts | 65230.3 | – |
| LC Ratio | 4.19% | – |
Source: All the above information is based on the website of the company, Annual and the latest Quarterly Report for the period ended 31st March 2024.
Conclusion:
Given the above information, we at Islamicly believe that Coal India Ltd. is a Shariah Compliant company as per the Shariah screening criteria.
