Coal India Limited is preparing to introduce a significant new levy—dubbed the 'Singrauli Punarasthapan charge'—effective May 1, 2025, which will amount to ₹300 per tonne across all coal dispatches from its subsidiary, Northern Coalfields Limited (NCL). This strategic move is expected to generate approximately ₹3,877.50 crore, aiming to bolster the company’s revenues and support various rehabilitation projects within coal-bearing regions.
The announcement, made on February 28, 2025, has already set the market abuzz. During early trading on the National Stock Exchange (NSE), Coal India's shares advanced by 3.27%, peaking at ₹375.75 per share. This uptick reflects investor optimism about the new charge, especially as the company faces significant challenges including declining share prices—down about 30% over the past six months.
NCL, which operates primarily within the Singrauli region of Madhya Pradesh and Sonbhadra district of Uttar Pradesh, is the third largest subsidiary of Coal India. It has reported impressive coal dispatch figures, contributing around 15% to the nation’s total coal production. The upcoming charge is expected to bring increases to Coal India's EBITDA, potentially by 9% to 10% annually, if other financial variables remain stable.
According to analysts from Nuvama Institutional Equities, this additional revenue could be pivotal for funding land acquisition and necessary rehabilitation initiatives at the mines. "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," they explained. They also optimistically noted, "The development makes us optimistic... other subsidiaries too can levy charges/take price hikes when costs increase," highlighting future growth opportunities if cost pressures necessitate similar moves across the company’s other subsidiaries.
Financially, Coal India’s performance is presently at a crossroads. Despite the promising news surrounding the levy, there are underlying concerns. Data shows minimal growth—only 1.8% year-on-year during April 2024 to January 2025, raising caution among investors and analysts alike. This stagnation could limit overall earnings growth, particularly as domestic and international coal markets evolve. Nuvama cautions, "The only worrying sign for Coal India is lack of volume growth, which may restrict overall earnings growth."
Commodity price fluctuations also present challenges, with the international thermal coal market entering volatile territories. Recent e-auction premiums have experienced declines, and market share losses might compound Coal India's struggle with production growth issues and evacuation challenges. Despite these uncertainties, Nuvama suggests investors retain their stance, emphasizing the stock's attractive 7% dividend yield, which could constrain any major downside risk.
The strategic move by Coal India's management seems calculated, hoping to mitigate the impact of these market pressures. Currently, Coal India stands well-capitalized on the NSE with market capitalizations near ₹2,31,071.50 crore. The impending levy also serves as the company’s response to many external pressures, including wage reviews due by June 2026.
Market analysts largely welcome the levy proposal with cautious optimism. Some buy-side institutions, including Morgan Stanley, rated the stock as “overweight” with price targets nearing ₹525 per share, representing nearly 45% upside potential from previous closing prices. The firm finds the levy promising, contributing about 2.5% to the estimated revenue for FY26, reducing pressures on earnings estimates and possibly allowing for more price adjustments moving forward.
Others have noted varying ratings, with JPMorgan maintaining its neutral position on Coal India, setting their price target at ₹420, slightly elevated from prior estimates. Their analysis assumes increased flows through projected EBITDA for upcoming financial years, which estimate overall improvements to surpass 8-9%. The recent forecast indicates strong sentiment toward how aggressively Coal India can adapt pricing strategies to market conditions.
Despite the challenges posed by slower volume growth and competitive pressures, including losses to captive coal producers, optimism remains prevalent among those watching Coal India’s navigation of this new price environment. With nearly 24 analysts covering the stock, consensus indicates 18 have 'buy', four have 'hold', and only two hold 'sell' ratings. Investors seem poised to monitor how the upcoming changes will influence performance.
Overall, Coal India's implementation of the 'Singrauli Punarasthapan charge' may serve as the necessary catalyst to reignite its growth momentum, fostering not only revenue but potentially restoring investor confidence as the stock works to recover from prior challenges.