Coal India share price is in focus after a big downgrade from the key brokerage house, Nuvama Institutional Equities. They have slashed the target for Coal India share price to Rs 367 per share from Rs 405 a share earlier. The new target price implies that the stock could potentially fall another 8% from current levels. Nuvama has also downgraded its recommendation for the stock to Reduce. This is because they believe that volume growth is a big risk and even 2–3% growth could be a tall ask between now and FY27.
Nuvama on Coal India: Risks to volume growth
One of the big concerns for Nuvama is the volume growth outlook for Coal India. According to them, the “long-term volume growth is at risk; Coal India started FY26 on a soft note with sales volume down 4.7% YoY during April-May.” They expect volumes to decline in June as well. Not only was there a fall in pre-Monsoon demand, but also volumes from captive and commercial mines are on the rise. This is likely to affect Coal India volumes. Nuvama has also cut volume estimates by 2% each year for FY26 and FY27.
Nuvama on Coal India: Production, volume, cost mis-match
Nuvama pointed out that the higher inventory also restricts any major production volume growth. Coal India management had earlier guided for an increase in stripping ratio to 2.67x. Between FY20-FY25, it averaged 2.31x and this is also expected to increase the production cost. “This along with the lack of meaningful production growth (no operating leverage) will increase overall cost of production in FY26,” added Nuvama. As the next wage revision is due in June next year, costs are expected to increase in FY27 as well amid higher employee cost.
Nuvama on Coal India: Lower e-auction price a concern
Lower global coal prices are also expected to put pressure on e-auction prices. This is another key risk, as per Nuvama. They explained that the Indonesian thermal coal prices have been under pressure in the last one year and are trading lower at $115 per tonne. “Further fall in global coal prices is possible, and it may not have bottomed out. “We observe Coal India’s e-auction prices too have drifted down and any push to volume under e-auction will put prices under further pressure,” they added.
All eyes on Bharat Coking Coal IPO
Apart from the fall in global coal prices, the sharp fall in e-auction prices and lower-than-expected volume growth, all eyes are also on the sale of the Govt’s stake via OFS. The Coal India subsidiary, Bharat Coking Coal, IPO is scheduled this year, but the IPO dates have not been announced yet. The DRHP indicates that the issue will be bookbuilding one of 46.57 crore shares. The issue is entirely an offer for sale of 46.57 crore shares. The DRHP was filed with SEBI on May 30.