Annexure XIV Continued… - Edelweiss

have the fuel resources required to operate such facilities and that have the infrastructure to transmit power to
deficit regions in India. For further details, please see the section titled "Our Business – Power Generation
Business – Power Projects under Construction, Implementation and Development" on page 157 of this Draft
Red Herring Prospectus.
Significant Factors Affecting our Results of Operations
Our financial condition and results of operations are affected by numerous factors, the following of which are
of particular importance:
Increased coal production and demand for beneficiated coal
Our coal beneficiation business has benefited from a period of sustained economic growth and an increase in
the production of coal in India. According to the Ministry of Coal, coal production in India grew at a CAGR of
6.80% from 2004-05 to 2009-10 (Source: CRISIL Research Review and Outlook on Power and Coal, April
2011). Moreover, Coal India Limited and its subsidiaries, which produce most of the coal in India and from
whom our customers purchase most of their coal, increased its production of Grade "F" coal from 153.01
million tons in Fiscal 2007 to 191.89 million tons in Fiscal 2010. Raw coal in India is generally "F" grade,
which has an ash content of approximately between 36% and 45%. Demand for beneficiated coal has increased
because power plants located more than 1,000 kilometres from the coal mine that supplies them are legally
required to use coal with an ash content of not more than 34% as their fuel. Power plants located in critically
polluted areas, urban areas and ecologically sensitive areas are also restricted in the same manner. For further
details, please see the section titled "Regulations and Policies in India" on page 178 of this Draft Red Herring
Prospectus. The only way to decrease the ash content of raw coal is to beneficiate it or blend it with coal of a
sufficiently low ash content. The sustained economic growth in India has also increased demand from our
customers, most of whom are public sector thermal generation companies and utilities, for beneficiated coal.
Demand can also be impacted by the location, availability, quality and price of alternative energy sources for
power generation, such as natural gas, fuel oil, nuclear, hydroelectric, wind and solar power.
The increased production of coal requiring, in certain circumstances, beneficiation, combined with the
increased demand for coal in India as a result of economic growth, has impacted the growth in our coal
beneficiation revenue. In Fiscal 2006 our coal beneficiation revenue was ` 2,308.74 million compared to `
3,508.04 million in Fiscal 2010, reflecting a CAGR of 11.03% over the period.
Increases in our coal beneficiation capacity
We have been able to benefit from the increase in the supply of coal and demand for beneficiated coal in part
by expanding our coal beneficiation capacity, particularly in areas that are characterized by having both
significant supplies of coal and demand for energy. For example, two of Coal India Limited's principal
subsidiaries, South Eastern Coal and Mahanadi Coalfields Limited, have substantial mining operations in
Chhattisgarh and Orissa, respectively, where we have increased our aggregate proportional beneficiation
capacity from 2.5 million tons per annum as of March 31, 2002 to 53.46 million tons per annum as of
December 31, 2010. Transporting raw coal from the mine to our coal beneficiation plants and from the plants
to our customers is expensive and requires adequate infrastructure, some of which we must develop ourselves
or negotiate with local governments to have developed. Consequently, the availability of land close to mines
and rail and road infrastructure, and developing coal beneficiation plants near mines and infrastructure, are two
of the most significant factors affecting our results of operations.
The table below sets forth for the periods indicated our number of coal beneficiation plants, our effective
economic interest in the capacity and the amount of coal beneficiated.
Particulars Fiscal 2002 Fiscal 2005 Fiscal 2007
Nine months
ended December
31, 2010
Number of plants (1) .................... 1 3 7 (3) 15 (4)
Effective Economic Interest in the
Capacity (1)(2) 2.5 12.62 21.32 53.46
Coal beneficiated ...................... 2.29 10.53 13.78 19.84
__________
(1) At period end.
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