Coal India Shares Surge as NCL Price Hike Boosts Volume Recovery
In a strategic move, Coal India Ltd’s subsidiary, Northern Coalfields, has implemented a ‘Singrauli Punarasthapan charge’ of Rs 300 per tonne on its entire volume starting May 1. This decision is projected to bolster Coal India’s Ebitda by 9-10 per cent annually, marking a significant financial upturn for the company. The influx of cash resulting from this levy is anticipated to be channeled towards funding an impending land acquisition and rehabilitation initiative at one of the mining sites in Singrauli in the coming years, industry analysts have revealed.
Impact on Revenue and Growth
Northern Coalfields Limited (NCL) stands as the third largest subsidiary under Coal India Ltd, boasting sales of 138 million tonnes in the fiscal year 2024, which contributed a substantial 18 per cent to the total sales volume of Coal India. According to the public sector undertaking (PSU), the imposition of this charge is poised to generate an additional revenue of Rs 3,880 crore in the fiscal year 2025, with a potential revenue boost of Rs 4,140 crore annually, based on a volume of 138 million tonnes.
“We understand this charge has been levied to fund the upcoming rehabilitation project in the Singrauli area (CIL has to do the rehabilitation project irrespective of the charges levied). Assuming other things remain constant, this should lead to a surge in Ebitda by Rs 4,140 crore/year. Our estimated capex of Rs 17,000 crore in each of FY26E/27E mostly incorporates the upcoming capex on rehabilitation project of the Singrauli area,” a statement from Nuvama, a domestic brokerage, highlighted.
The brokerage further projected an increase in capital expenditure for the project to commence from the financial year 2028 onwards. Consequently, Nuvama’s estimated Ebitda is anticipated to witness a growth of 9 per cent in the fiscal year 2026 and 10 per cent in the fiscal year 2027, holding the capital expenditure steady at Rs 17,000 crore.
Market Analysis and Future Prospects
Nuvama emphasized the potential for other subsidiaries of Coal India to follow suit by imposing charges or initiating price hikes in response to rising costs, with the next wage revision slated for June 2026. The last comprehensive price revision under full volume of Fuel Supply Agreement occurred in January 2018, while in May 2023, Coal India raised prices by 8 per cent for high-grade coal (G1–G10), accounting for 30 per cent of the volume, with price hikes ranging from INR100–264 per tonne.
Despite the positive trajectory, Nuvama expressed concerns over the lack of volume growth experienced by Coal India, noting a marginal 1.8 per cent year-on-year increase in volume between April 2024 and January 2025, totaling 630 million tonnes. This sluggish growth trend may potentially impede overall earnings growth for the company, warranting caution.
Looking ahead, the brokerage firm indicated that a sustained volume recovery would be a key factor in turning sentiment positive towards Coal India. With the stock currently offering a 7 per cent dividend yield at the prevailing market price, the downside risk appears limited. Nuvama maintained a ‘HOLD’ rating on the stock, setting a target price of Rs 419.
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