Coal India shares: NCL price hike a welcome move, eyes on volume recovery, says Nuvama

The move by Coal India Ltd subsidiary, Northern Coalfields, regarding the levy of ‘Singrauli Punarasthapan charge’ of Rs 300 per tonne on its entire volume from May 1 is expected to boost Coal India's Ebitda by 9-10 per cent annually. The cash inflow is likely to be widely used to fund the upcoming land acquisition and rehabilitation programme at one of the mining areas in Singrauli over the next few years, analysts said.

NCL is the third largest subsidiary with sales of 138 mt in FY24, contributing 18 per cent of Coal India's total sales volume. As per the PSU, this levy is likely to increase revenue by Rs 3,880 crore in FY25. Assuming 138 mt volume, additional revenue would be Rs 4,140 crore per year.

"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," Nuvama id.

The domestic brokerage said the expansion in capex on the project may start FY28 onwards. As a result, Nuvama's estimated Ebitda is likely to surge 9 per cent in FY26 and 10 per cent FY27 while capex remains same as Rs 17,000 crore.

"The above development makes us optimistic that CIL’s other subsidiaries too can levy charges/take price hikes when costs increases (next wage revision due in June 2026). The last general price hike under full volume of FSA took place in January 2018. In May 2023, CIL increased prices by 8 per cent for high-grade coal (i.e. G1–G10; 30 per cent of volume, price hike ranges from INR100–264/t)," it noted.

Nuvama said the only worrying sign for Coal India is lack of volume growth. Between April 2024 and January 2025, its volume was up a mere 1.8 per cent YoY at 630 mt. This may restrict the overall earnings growth, Nuvama warned.

For now, the brokerage said it would turn positive on CIL on any signs of a sustained volume recovery. At the prevailing market price, the stock is available at 7 per cent dividend yield, restricting any major downside too. Nuvama retained ‘HOLD’ on the stock with a target price of Rs 419 on the stock.