Coal India’s recent quarter looks weak on every metric analysts track.
Production is lower.
Offtake is lower.
Realisations are softer.
Profitability is down.
Brokerages have trimmed estimates and the stock trades as if the long-term direction is obvious and negative. On the surface, it resembles the familiar story of a commodity company stuck in a slow phase.
The difficulty is that the larger energy landscape is not behaving the way this narrative assumes.
The energy system tells a different story
The weakness in Coal India’s quarterly numbers does not match the larger environment in which the company operates.
Electricity consumption continues to rise.
The Ministry of Power’s generation targets point upward, not sideways.
India’s per capita commercial energy consumption remains well below developed economies and the Ministry of Coal expects this gap to narrow as incomes and industrial activity expand.
ICRA expects annual electricity demand to grow 6–6.5% through FY2030, driven by sectors that are not shrinking. Data centres, electric vehicles, heavy industry and early green hydrogen loads are all adding to the grid, not subtracting from it.
These are long-term structural drivers. They do not suggest declining relevance.
Coal still anchors the system
Renewable capacity has expanded quickly, but its contribution to actual generation remains significantly lower.
There are days when renewables meet more than half the demand, but those days are unusual and dependent on weather. Storage constraints, grid flexibility and transmission issues remain binding.
Coal-based generation has hit new highs. Peak coal consumption keeps shifting forward as overall demand rises and the grid absorbs variable renewable energy at a controlled pace. Coal still provides the baseload that keeps the system stable.
This is the environment Coal India operates in. It also explains why a few weak quarters does not automatically indicate structural decline.
Short term pressure, long term constraints
Coal India’s quarterly numbers reflect immediate pressures.
H1FY26 revenue is down 2.4% as production fell and offtake dipped.
Auction premiums moderated to about 55% over FSA prices compared to 69% a year ago.
Costs per tonne increased.
This combination pushed earnings before interest, tax, depreciation and amortisation down 16% year-on-year. Analysts responded by modelling modest volume growth and assuming muted auction premiums and incremental pressure from captive mining in the coming years.
Coal India’s internal commentary, however, points to operational rather than structural issues. Subsidiaries affected by rainfall and delayed clearances expect normalisation as conditions improve.
Evacuation capacity has risen meaningfully. Rake loading moved from 72.7 rakes/day to 87.1 rakes/day, with a target of 100 rakes/day for FY26.
New silos are being deployed across subsidiaries to improve dispatch stability.
On the demand side, more stressed power units are returning to service, reducing dependence on imports for blending.
Long-term linkages for non-power consumers have increased from 90 million tonnes to 115 million tonnes in two years.
None of this fits the narrative of shrinking relevance.
Moreover, Coal India’s formal guidance further widens this gap.
The company expects production of 875 million tonnes in FY26 and more than 900 million tonnes in FY27.
Capex strategy: Betting on evacuation, not just extraction
Coal India’s plans for the coming years are not about reinvention. They’re about doubling down on the parts of the system that still need hard infrastructure.
Start with the money. The company spent Rs 21,776 crore in FY25 on capital expenditure.
For FY26, Coal India has a Rs 16,000-crore capex plan. More than a third of it, about Rs 5,622 crore, goes into evacuation: first-mile connectivity, rapid-loading silos, rail sidings and coal-handling plants. These are the small things that determine whether higher production can actually leave the pit. Rs 2,382 crore is set aside for land. Another Rs 1,950 crore will go into heavy earthmoving machinery, washeries and assorted equipment. Solar, JVs and mine development take the rest.
The project list tells the same story.
- Washeries being added across subsidiaries are meant to supply better-grade coal to steel and industrial users, reducing impurities and transport waste.
- First-mile connectivity is being scaled through automated silos and rapid-loading systems. These cut handling losses and ease pressure on roads.
- The newly formed renewable subsidiary is taking incremental positions in solar, but the absolute amounts remain modest relative to Coal India’s core.
- Mechanisation and new mines continue, largely to reduce contractor reliance and raise productivity.
- Subsidiary restructuring, including the draft filings for Bharat Coking Coal and Central Mine Planning and Design Institute, signals internal housekeeping rather than anything transformative.
None of this shifts the company away from coal. Instead, it shows where Coal India believes the bottlenecks are, evacuation, quality and small shifts in efficiency and how it is choosing to spend money in response.
What the spending does not capture, however, is the value sitting inside the company’s subsidiaries.
Unlocking Value: The hidden subsidiary IPOs
Two subsidiaries, Bharat Coking Coal Limited and Central Mine Planning and Design Institute Limited, have filed draft documents for listing.
Bharat Coking Coal Limited owns scarce coking coal reserves that steel plants depend on.
Central Mine Planning and Design Institute Limited provides geological, environmental and mining expertise that the larger coal ecosystem depends on.
These are not easily replaceable assets.
Other subsidiaries hold washeries, silos, loading systems, land parcels and first-mile connectivity infrastructure. These carry long-term strategic value but none of it is visible in the parent’s market valuation. Coal India is priced as if it were a single-line thermal coal miner, not a company that owns an entire ecosystem of mining and evacuation assets.
Balance sheet strength and dividend yield add another layer
Coal India’s balance sheet does not resemble that of a company in structural decline.
The company operates with near-zero debt and generates steady operating cash flows even in weaker quarters.
It paid a total dividend of Rs 26.50/share in FY25, translating into a dividend yield of roughly 6–7% at current prices. Brokerages expect the dividend yield to remain 6–7% over FY26–FY28.
A debt-light, cash-generating, high-dividend business is not behaving like a company whose relevance is collapsing.
A valuation that has stayed low while the system has moved on
Coal India trades at a price-to-earnings ratio of 7.6 times, close to its 5-year median PE. The stock has carried a low valuation for years, as if the business were on a steady path to irrelevance. The difficulty is that the larger energy system has not followed that script.
Electricity demand keeps rising while renewable generation remains limited by storage and grid constraints. Coal-based power continues to carry most of the load. Coal India’s subsidiaries hold assets the market ignores, its capex is concentrated on evacuation and quality, it operates with almost no debt and its dividend yield is one of the highest among large caps. None of this shows up in the share price, which still reflects an argument about long-term decline that the energy system itself does not support.
The Real Contradiction
The power system depends on coal. Coal India is building capacity to move more of it. Its subsidiaries hold strategic assets that are not priced. Its balance sheet signals stability, not erosion. Yet the stock trades as if the company’s relevance is fading.
A few weak quarters are visible. The structural dependence is not. The real story lies in that gap.
Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
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