Can Bharat Coking Coal’s IPO Deliver Long-Term Value for Retail Investors?
Overview of Bharat Coking Coal’s IPO
Bharat Coking Coal, a prominent Miniratna PSU and India’s largest coking coal producer, is gearing up for an initial public offering (IPO) aiming to raise ₹1,071 crore through an offer for sale (OFS). After the IPO, promoter Coal India’s ownership will reduce from 100% to 90%.
Financial Insights and Market Position
– Valuation Metrics:
– The IPO is valued at a trailing price-earnings (P/E) multiple of 8.6 based on post-IPO equity.
– With an annualized profit for FY26, the P/E rises to 43, influenced by profitability declines from heavy rains in the region.
– Production and Demand:
– Bharat Coking Coal operates 34 mines across Jharkhand and West Bengal.
– As of FY25, India’s coking coal reserves are estimated at 36.8 billion tonnes, of which the company holds 7.9 billion tonnes.
– Annual production saw growth from 33.7 million tonnes in FY23 to 38.9 million tonnes in FY25, while non-coking coal production dropped from 2.5 million tonnes to 1.6 million tonnes.
– Demand for coking coal is expected to surge, with projections indicating a rise to 138 million metric tonnes (MMT) by FY35, nearly doubling from 67 MMT in FY25.
Strategic Developments
– Expansion Plans:
– To meet increasing demand, Bharat Coking Coal plans to commission three new washeries with a combined capacity of seven million tonnes per year.
– The Bhujudih washery in Purulia, West Bengal, is set to be operational by mid-January, followed by Patherdih-II next financial year and Moonidih by FY28.
Financial Performance
– Recent Financial Metrics:
– Revenue in FY25 reached ₹13,802 crore, showing a 5% annual increase from ₹12,624 crore in FY23.
– However, there was a 17% year-on-year decline in the six months leading to September 2025, primarily due to adverse weather conditions.
– The operating margin (Ebitda margin) increased to 16% in FY25, up from 6.8% in FY23.
– Net profit also experienced a significant rise of 37% from FY23 to FY25, amounting to ₹1,240 crore.
– Working Capital Considerations:
– The number of days for trade receivables rose to 40 in FY25 from 36 in FY23, indicating longer collection cycles that may affect liquidity.
Risks and Considerations for Retail Investors
While Bharat Coking Coal is positioned well within the coking coal market due to its substantial reserves and production capacity, potential investors should consider:
– Customer Concentration Risk:
– The top 10 customers contributed 80% of revenue in FY25.
– Longer Working Capital Cycles:
– The extended collection periods could challenge cash flow management.
– Shift in Energy Source:
– Increasing adoption of renewable energy sources may influence future coal demand, given that approximately 75% of the company’s revenue is sourced from the power sector.
Conclusion: Long-Term Value Perspective
Bharat Coking Coal’s IPO could represent a valuable opportunity for retail investors willing to embrace higher risk levels. The company’s strategic plans, robust market position, and expected rise in coking coal demand indicate potential for long-term value. However, the challenges posed by customer concentration, extended working capital cycles, and the evolving energy landscape should be carefully evaluated before making investment decisions.