Numbers

Claude View

The Numbers

Coal India trades at 8.9x earnings and a 6.1% dividend yield despite 48% RoCE and 38.9% RoE — the market is pricing a structural de-rating, not a cyclical one. The numbers say the cash engine is still enormous (₹29,200 Cr operating cash flow in FY25, ₹99,100 Cr cash + investments on the balance sheet), but volumes have plateaued, e-auction premiums are collapsing, and stripping ratios are rising. The single metric that will rerate or derate the stock is e-auction realisation per tonne — it has fallen from ₹3,321/t to ~₹2,357/t in a year, and it is the whole reason earnings are down while volumes are up.

Valuation snapshot

Price (₹)

435

Market Cap (₹ Cr)

2,682,020

P/E (TTM)

8.9

Dividend Yield

6.1%

Return on Equity

38.9%

Return on Capital Employed

48.0%

Price / Book

2.5

Book Value / Share (₹)

171

**The central tension.** A company compounding book value at 20%+ with 48% RoCE should not trade at 2.5x P/B and 8.9x earnings unless the market disbelieves the earnings are durable. The numbers below show why the doubt exists — and why it may still be overdone.

Price & 52-week position

At ₹435 the stock sits 62% into its 52-week band — not cheap on price action, but multiples haven't expanded because earnings growth has stalled.

Revenue & earnings power

Revenue doubled from FY21 to FY24 on the post-COVID coal supercycle, then flatlined in FY25. Net income tripled in the same window — showing how much operating leverage sits in Coal India's fixed-cost base. The question for FY26 is whether FY24 was the peak or the new plateau.

Margins expanded from 21% to 33% as realisations rose and wage costs lagged. That wedge is now closing — the Q3 FY26 number sits at 27%.

Quarterly reality check — the derating quarter

The Q3 FY26 print crystallises the bear thesis: revenue down 5.2% YoY, net profit down 16% YoY, operating margin compressed 600 bps from Q3 FY25. Pay-revision charges and a ~30% drop in e-auction realisations (from ~₹3,321/t to ~₹2,357/t) did the damage.

The one chart that explains the stock

**Critical chart.** E-auction volume is ~10–15% of sales but carries 40–60% higher realisations than FSA (fuel-supply agreement) coal. When the spread between e-auction and FSA prices collapses, disproportionate earnings disappear. That is what has happened over the last four quarters — and it is why the stock is not rewarding the underlying production story.

Cash generation — the bull case still holds here

FY25 OCF bounced 61% YoY as working capital unwound; FCF proxy (OCF + investing cash flow excluding investments movement) reached ~₹19,100 Cr. At a market cap of ₹2,68,200 Cr, that is a ~7% FCF yield on top of a 6% dividend yield — the balance-sheet cushion the market is discounting.

Capital allocation — dividends dominate, capex rising

Dividends have stayed remarkably stable at ₹15–17,000 Cr/yr even through the down cycle — supported by 63.1% government ownership which needs the yield for fiscal revenue. Capex has climbed to ~₹25,000 Cr/yr as the company funds evacuation infrastructure and overburden removal ahead of the 1 Bt volume target.

Balance sheet — a net-cash fortress

Equity has tripled since FY20 (₹32,157 → ₹99,105 Cr) even after paying ~₹80,000 Cr in dividends over that window. Total debt is trivial at ₹9,146 Cr vs equity of ₹99,105 Cr — a 9% debt-to-equity ratio. Interest coverage is ~53x. There is no solvency risk anywhere in this model.

Returns have doubled — then started to fade

RoCE peaked at 78% in FY23 and has since compressed back to 48% as the capital base swells faster than earnings. This is the number Warren would watch most closely: if FY26 prints in the 30s, the multiple de-rating is justified; if it stabilises near 48%, the stock is cheap.

Peer comparison — a unique risk/reward profile

No Results

The peer set is uneven — HINDZINC and VEDL are zinc/multi-metal plays, SAIL is downstream steel, NMDC is iron ore. Among all of them, Coal India has the lowest P/E, the second-highest dividend yield, and the third-highest RoCE. The only company producing clearly higher returns is HINDZINC (61% RoCE), and it trades at 21x P/E vs 8.9x for COALINDIA. SAIL and NLCINDIA trade at higher multiples on vastly weaker fundamentals.

Valuation scatter — where does the stock belong?

Coal India is the clear outlier on the RoCE axis for its P/E. Even if RoCE drifts toward 35-40% over the cycle, the stock would need to rerate materially to reach a fair relationship with peers.

Shareholding — government overhang but no selling pressure

The Government of India holds a steady 63.13% — no OFS in several quarters. FII stake has oscillated between 7.7% and 9.3% since FY23. Retail investor base has grown from 1.32M to 2.79M shareholders, signalling yield-seeking retail flows into the stock.

Earnings surprise & analyst consensus

No Results

Street consensus sits at ~₹422 — slightly below current price — with a wide spread reflecting disagreement on realisation trajectory. Bull case of ₹500-520 requires FY27 e-auction realisations to recover toward ₹3,000/t.

Book value has grown at a 25% CAGR since FY20 even while paying out ~45% of earnings — that is the compounding engine the market is currently ignoring. Dividend per share has roughly doubled in five years.

What the numbers confirm, contradict, and what to watch

**Confirmed:** Balance-sheet strength (9% D/E, ₹99,100 Cr equity), cash generation (7%+ FCF yield), cheap absolute valuation (8.9x P/E, 6.1% yield), and capital-allocation discipline (stable dividend through the cycle).

Contradicted: The "infinite growth" bull narrative — revenue was flat FY24→FY25 and is tracking down ~5% in FY26 YTD. RoCE has fallen from 78% to 48%, and Q3 FY26 operating margin (27%) is the weakest in eight quarters.

Watch next quarter (Q4 FY26):

E-auction realisation — needs to stabilise above ₹2,300/t or earnings compression continues.
Offtake growth — production trending to ~800 Mt; the 1 Bt target by FY27 looks increasingly stretched.
RoCE — if FY26 prints below 40%, the multiple de-rating is validated.
Dividend declaration — a cut would destroy the retail-yield thesis; continuation at ₹26+ DPS keeps the floor intact.