Central public sector enterprise Bharat Coking Coal Limited (BCCL) is India’s largest producer of coking coal, a critical raw material used in steelmaking. Its operations are entirely concentrated in the Jharia coalfield (Jharkhand) and the Raniganj coalfield (West Bengal). It is a wholly-owned subsidiary of Coal India and accounted for 58.5 per cent of India’s FY25 domestic coking coal output.

Coking coal differs from the more familiar thermal coal. While thermal coal is burned to generate electricity, coking coal is converted into coke, which is then used in blast furnaces to make steel.

BCCL is now coming to the market through an initial public offering, an entirely offer-for-sale (46.57 crore shares). At the upper end of the price band of ₹21-23 per share, the IPO values the company at roughly ₹10,711 crore. No fresh capital will flow into BCCL. The issue proceeds of about ₹1,071 crore will go to Coal India.

On headline valuation, the IPO appears inexpensive. On FY25 earnings, BCCL is valued at 8.7 times price-to-earnings and about 4.8 times EV-to-EBITDA. However, when one looks at the last twelve months’ numbers, which incorporate the sharp 83 per cent y-o-y profit decline in the first six months of FY26, the P/E valuation jumps to 17.4 times and the EV to EBITDA to about 7.8 times. The valuation gap reflects whether profits settle closer to FY25 levels or remain closer to the weaker recent run rate seen in the first half of FY26.

In comparison, parent Coal India is valued at 7.5 times P/E and 5.6 times EV/EBITDA on a trailing twelve-month basis. BCCL is a concentrated, more cycle-sensitive bet that doesn’t meaningfully improve the risk–reward versus just owning the diversified, steadier parent, Coal India. Thus, investors can stay on the sidelines for the BCCL IPO.

Business details

India produces a large quantity of coal (FY25: 1048 million metric tonnes, or MMT), but most (94 per cent) is thermal coal. Coking coal is scarcer not just because of tonnage, but because only coal with specific properties can be used efficiently in steelmaking.

Indian coking coal, including that produced by BCCL, is generally high in ash content. To be usable in blast furnaces, it must be washed to reduce ash levels. For the efficient operation of blast furnaces, the Indian steel industry imports high-quality coking coal and blends it with inferior-quality Indian coking coal.

BCCL holds coking coal geological resources of 7,910 MMT reserves and total reserves (proved and probable) of 1,495 MMT. It has 34 operational mines and 5 coal washeries.

BCCL produces both raw coking coal and washed coking coal (processed to remove impurities). In FY25, it produced 40.5 MMT of raw coal, including 38.9 MMT of raw coking coal. Washed output was much smaller at 1.65 MMT of washed coking coal (primary output) and 3.16 MMT of washed power coal (secondary output).

On the revenue side, BCCL’s sales have historically been dominated by the power segment. The top 10 customers (which account for over 80 per cent of sales) are mostly power PSUs. In FY25, the power industry accounted for about 74 per cent of total sales, while steel accounted for about 18 per cent.

The same pattern continued in the first half of FY26, with power at about 75 per cent and steel at about 18 per cent. Even as BCCL is India’s largest coking coal producer by volume, a large part of its monetisation is still linked to the power channel. Washed coking coal accounts for a smaller share of revenue (20-21 per cent).

The company is trying to change this mix. BCCL plans to ramp up raw coal production to 40.5 MMT (currently 40.5 MMT). At the same time, coal washing capacity is expected to increase from 13.65 million tonnes per annum (MTPA) to over 20 MTPA, with three new washeries under development. Management guidance suggests that most of the incremental production will be directed towards the steel sector, while power sector volumes remain broadly stable.

Over time, greater use of electric arc furnaces and hydrogen-based steelmaking could reduce blast furnace capacity and structurally soften demand for coking coal. Similarly, India’s expanding renewable capacity could gradually limit long-term coal demand from the power sector.

Coking coal pricing is set through multiple channels: long-term Fuel Supply Agreements (FSAs), linkage auctions, e-auctions, and negotiated MoUs with large customers. E-auction prices are market-linked and can swing with domestic and global supply and demand. This means BCCL does benefit when global coking coal prices rise, but also feels the downside when they soften. For instance, premium hard coking coal prices landed in India swung from a pre-COVID band of roughly $120–$170 a tonne to a Russia-Ukraine war-era peak of $637 in 2022, before normalising; by late 2025, they are back near $200 a tonne, around $214 in Oct-25, as per a Crisil Intelligence report.

Earnings cycle

In the aftermath of global coking coal prices surging following the Russia-Ukraine conflict, BCCL in FY24 reported a net profit of ₹1,564 crore, wiping out accumulated losses carried on the balance sheet from earlier years. EBITDA margin expanded sharply to 17 per cent from less than 7 per cent a year ago.

In FY25, global prices cooled. Production volumes remained broadly steady, but revenue declined slightly, and profit fell about 21 per cent to ₹1,240 crore. This was a normalisation phase rather than a collapse. It shows clearly that BCCL’s earnings are sensitive to realisations per tonne, even when physical output is stable.

The real stress appeared in H1FY26. Compared to H1FY25, revenue fell by about 17 per cent, while EBITDA plummeted from ₹1,373 crore to about ₹460 crore. Profit margins compressed sharply. Management attributed this to heavy rainfall and subdued global prices, amongst other factors.

As of September 2025, BCCL’s contingent liabilities (largely relating to tax and statutory matters) of about ₹3,599 crore were equivalent to roughly 62 per cent of its net worth.

While it had no borrowings at March 2025, BCCL reported current borrowings of about ₹1,559 crore as of September 2025, i.e. roughly 1.1 times LTM EBITDA.

A key risk is BCCL’s heavy exposure to the Jharia coalfield, where underground fires and complex geology pose operational challenges.

Over the last few years, BCCL has shifted from a labour-intensive in-house mining model to a more outsourced structure. Contract mining and overburden removal (removal of soil/rock above the coal seam) now account for a much larger share of costs. Contractual expenses rose from about 19 per cent of operational revenue in FY23 to roughly 31 per cent by FY25 and 36 per cent in H1FY26. As contractor payouts are usually linked to activity and rates, a decline in selling prices can squeeze profitability disproportionately.

Meanwhile, BCCL is reviving some underground mines through the MDO model and exploring coalbed methane projects.

Coal India Lens

BCCL’s IPO cannot be assessed in isolation. Coal India will continue to own about 90 per cent of the company after listing. At the group level, BCCL’s operations, risks, and cash flows are already included in Coal India’s consolidated numbers.

For a long-term investor, is there any incremental exposure BCCL offers that Coal India does not?

Coal India is a diversified coal producer, dominated by thermal coal, with structurally higher and more stable margins (over 30 per cent). Coal India has thrown off cash and dividends, but the stock has been muted: about 75 per cent price gain since the 2010 IPO, excluding dividends. On a total return basis, Coal India has delivered a 168 per cent gain since its public issue, but has underperformed the Nifty’s 341 per cent rise in the same period.

Investors must understand that BCCL represents a concentrated slice of the same ecosystem. It offers higher sensitivity to steel cycles and global coking coal prices, but also greater earnings volatility.

On normalised numbers (last 12 months), BCCL’s EV to EBITDA multiple of 7.8 times (at IPO price) is materially higher than Coal India’s multiple of 5.6 times. Between FY21-25, the average Coal India valuation multiple ranged from 2.8 to 5.2 times, per Bloomberg.

For long-term investors, the focused, cyclical small-cap exposure from BCCL adds little value over owning the broader, more stable large-cap parent. Given these factors, investors can stay on the sidelines for this IPO.

Published on January 8, 2026