Wealth tripled in 5 years, will Bharat Coking Coal IPO unlock more value for Coal India shareholders?

Shares of Coal India have delivered strong returns over the past five years, turning the state-run miner into one of the market’s biggest wealth creators among PSU stocks. From early 2021 to now, Coal India’s market value has more than tripled, helped by higher coal prices, record dividends, steady production growth and renewed investor interest in cash-rich public sector companies.

As investors digest this remarkable run, attention now shifts to the proposed IPO of Bharat Coking Coal (BCCL). The key question is whether the listing can unlock fresh value for Coal India shareholders or whether most of the upside is already behind them.

Why Bharat Coking Coal IPO matters

BCCL owns some of India’s largest and highest-quality prime coking coal reserves in the Jharia coalfields, a resource that is both scarce and strategically important. India depends heavily on imported coking coal for steel production, making domestic supply critical during periods of global shortage.According to Prashanth Tapse, Senior VP Research Analyst at Mehta Equities, listing BCCL allows the market to independently value these long-life reserves. He says the IPO has the potential to unlock value through clearer price discovery, reserve monetisation and better transparency at the subsidiary level.

While the estimated gain of over Rs 600 crore from stake dilution may not significantly alter Coal India’s balance sheet, it improves capital efficiency and could help narrow the holding company discount over time.

Near-term gains vs long-term value

Not all analysts see the IPO as a long-term compounding story. Some believe the opportunity is more tactical in nature. They point out that the scarcity value of prime coking coal and strong sentiment around PSU divestments could drive healthy listing gains for BCCL.However, the business remains cyclical. Coking coal demand depends heavily on the steel cycle, and pricing operates within a regulated environment. Without clear growth triggers after listing, sustained re-rating will hinge on operational efficiency and the direction of the steel market.

Has Coal India priced it in already?

A more cautious assessment comes from Abhishek Jain, Head of Research at Arihant Capital Markets. He believes the BCCL IPO may lead to only limited value unlocking for Coal India shareholders, with much of the optimism already reflected in the stock’s recent rally.

Jain also flags the risk of Coal India trading at a holding company discount after the listing, which could offset some of the benefits from value discovery. From an earnings and growth perspective, he sees the overall impact as largely neutral.

The case for strategic value unlocking

Others take a more constructive medium-term view. Nitant Darekar, Research Analyst at Bonanza, says the IPO represents a strategic value unlock across multiple channels. Coal India will realise immediate cash from divesting a 10% stake while retaining 90% ownership in India’s largest coking coal producer, which commands nearly 58.5% of the domestic market.

BCCL’s fundamentals remain strong, with reserves of about 7,910 million tonnes, 34 operational mines and production rising from 30.51 million tonnes in FY22 to 40.50 million tonnes by FY25. Darekar adds that this IPO could set the stage for future listings of other Coal India subsidiaries, laying the groundwork for long-term value monetisation beyond the immediate proceeds.

Bigger picture for shareholders

Gaurav Garg, Research Analyst at Lemonn Markets Desk, views the BCCL IPO as more than a routine listing. He says it signals a broader strategy to unlock embedded value across the group. According to him, the combination of cash inflows, potential re-rating at the parent level and independent growth at the subsidiary could mark the beginning of a longer value creation cycle for Coal India shareholders.

So, what should investors expect?

Coal India’s wealth creation over the past five years is already a strong endorsement of its cash-generating ability. The BCCL IPO is unlikely to dramatically change the company’s near-term earnings profile, but it does add a new layer of transparency and strategic optionality.

For investors, the listing may offer incremental value rather than a repeat of the recent gains, with the real test lying in execution, future subsidiary listings and discipline in capital allocation.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)