Can Bharat Coking Coal’s IPO deliver long-term value for retail investors?

ET Intelligence Group: Bharat Coking Coal, a Miniratna PSU and the country's largest producer of coking coal, aims to raise ₹1,071 crore through an offer for sale (OFS). Promoter Coal India's shareholding will decline to 90% after the IPO from 100%. The company is well placed to tap rising coking coal demand, supported by the steel industry's expansion. The Miniratna company plans to commission three new washeries with a combined capacity of seven million tonnes per year. However, it exhibits higher customer concentration risk and longer working capital cycles. The other challenge is rising adoption of renewable energy sources, which is expected to impact coal demand over the long term as the company generates nearly 75% revenue from the power sector. Given these factors, the issue is suitable for long-term retail investors with a higher risk tolerance.

Business
Incorporated in 1972, Bharat Coking Coal operates 34 mines in Jharkhand and West Bengal. As of FY25, India's coking coal resources are estimated at 36.8 billion tonnes. The company holds 7.9 billion tonnes of these reserves as of April 1, 2024, making it the country's sole source of prime coking coal. Top 10 customers contributed 80% to revenue in FY25. The coking coal production increased to 38.9 million tonnes in FY25 from 33.7 million tonnes in FY23 while non coking coal production declined to 1.6 million tonnes from 2.5 million tonnes.


The company plans to commission three new washeries of which the Bhujudih washery in Purulia, West Bengal, is slated for commissioning by mid-January. Patherdih-II will come online next financial year, and Moonidih is scheduled for FY28. According to Crisil, India's coking coal demand is projected to nearly double to 138 million metric tonnes (MMT) by FY35 from 67 MMT in FY25.

Financials
Revenue increased 5% annually to ₹13,802 crore in FY25 from ₹12,624 crore in FY23. It, however, declined 17% year-on-year to ₹5,659 crore in the six months to September 2025, impacted by heavy rains. The operating margin before depreciation and amortisation (Ebitda margin) improved to 16% in FY25 from 6.8% in FY23. Net profit grew by 37% annually to ₹1,240 crore between FY23 and FY25. Trade receivables days increased to 40 in FY25 from 36 in FY23, reflecting extended collection cycle that may affect cash flows. As a PSU, the company will follow government's guidelines of paying an annual dividend of at least 30% of net profit or 5% of net worth, whichever is higher.

Valuation
The issue is valued at a trailing price-earnings (P/E) multiple of 8.6 based on post-IPO equity. Considering annualised profit for FY26, the P/E is 43, reflecting the impact on profitability due to heavy rains in the region. There are no comparable listed peers in India.