Shares of Coal India Ltd fell sharply in early trade on Tuesday, declining about 5 per cent amid selling pressure and cautious brokerage commentary on the company’s earnings outlook. The stock opened on a firm note at ₹463 on the NSE compared with the previous close of ₹455.25, but failed to sustain gains and slipped to an intraday low of ₹439.
The weakness in the counter comes even as global coal prices remain volatile, with investors turning cautious over the company’s volume growth prospects and margin trajectory.
Nuvama Institutional Equities retained its ‘reduce’ rating on Coal India with a target price of ₹384, citing concerns over muted earnings growth and limited upside at current valuations. The brokerage said the company’s expectations of higher sales volumes and improved e-auction realisations may not materialise due to excess domestic coal supply, rising competition and relatively weak demand conditions.
According to the brokerage, blended e-auction prices are likely to remain range-bound, with premiums seen at 35–40 per cent compared with the average of 37 per cent in the first nine months of the current financial year. While auction volumes may improve, the firm noted that Coal India is yet to demonstrate meaningful volume growth and warned that its projected 4 per cent compound annual growth in volumes over FY26–FY28 could be at risk due to rising output from captive coal miners.
Wage revision impact on profitability
Nuvama also highlighted that a wage revision for non-executives due from July 2026 could weigh on profitability, as the company may find it difficult to fully pass on the higher costs. It expects earnings to remain subdued, projecting an EBITDA compound annual growth rate of about 4 per cent over FY26–FY28.
Coal price impact
Despite a recent surge in international coal prices driven by supply concerns in Indonesia and geopolitical tensions in the Middle East, the brokerage noted that Coal India’s e-auction premium has remained relatively stable amid ample domestic supply. It added that any increase in Indonesia’s production targets could limit further upside in global coal prices.
The brokerage further cautioned that profitability and return ratios are unlikely to see meaningful improvement over the next two financial years, leading it to believe that the stock’s valuation multiple could moderate closer to its long-term average levels.
On Monday, Coal India’s board approved divestment plans for key subsidiaries as part of its strategic restructuring initiatives. The company cleared a proposal to divest up to a 25 per cent stake in South Eastern Coalfields through an offer for sale, along with the issuance of fresh equity shares of up to a 10 per cent stake via an initial public offering in one or more tranches.
The board also granted in-principle approval through an offer for sale and public offering. In addition, it approved a proposal to incorporate an intermediate holding company in Singapore to streamline overseas business structures.