“So this is definitely something big coming out of the company with BCCL already on track to get listed within a timeline of about two to three weeks. There were news articles floating around yesterday saying that the company’s valuation was around 13,000 odd crores and then last night they came out that SECL and MCL have both received in-principle approval as rightly mentioned earlier. Both the entities are substantially large and contribute almost almost 45% to 50% of the for Coal India as whole,” Jhonsa said.He added that MCL stands out in terms of operational efficiency. “As far as MCL is concerned, it actually beats a lot of front compared to the other grants in terms of the productivity or output of your manpower, they call it OMS, as far as OBR is concerned. So all those front MCL are basically much better placed than the whole mixed base. So it is a very positive move in my opinion. Next FY27, it will take about a year and a half for the company to also get the approvals and approvals from the regulators and this is practically a good value unlock that is on the record.”
When asked about the potential valuation impact of these listings, Jhonsa noted, “So if you take BCCL as a bullet, 13,000 crores, if you see BCCL in the first half, whatever numbers the company has declared, the profitability has actually fallen substantially, almost good, about 80% to 83%, it has fallen. So let’s compare that, even if you get a 1x the top line that is there in the case of BCCL, was it’s almost around 13,500-14,000 crores, kind of a top company in FY25, and a similar market cap is expected upon listing. Even if you consider that, then SECL and MCL both together are somewhere around 65,000 to 70,000 crores together, so that’s a very rough reference number, but it all depends on the ministry, it all depends on the circumstances and the markets. So it’s definitely still far forward over time, but yes, it is a substantial unlocking of value, just as we’ve said it before, MCL is much better placed on the operational metrics, the core of the matter than the other subsidiaries listed today. So I think it will be a much better unlocking of value going forward.
When asked if the listings could result in a holding discount for Coal India, Jhonsa explained: “No, definitely, there will definitely be some holding discounts coming in, but the company also has a few other subsidiaries like NCL and CCL on its books. There’s no other announcement coming out for those two other big subsidiaries either. So they still have good subsidiaries on their books. Apart from what I believe now, they’re just diluting. 10% in BCCL If that’s the kind of dilution then there would be no substantial kickback discount as a holding company.”
Regarding the best approach for shareholders – whether through share swaps or cash proceeds from the sale offer – Jhonsa emphasized the preliminary nature of the process. “Honestly, this is beyond anyone’s understanding at this point because it is too preliminary. They have only received in-principle approval. What they have done with BCCL is that they are doing an OFS so that the money would come on the books. I am not too sure what the date is because it is too preliminary to say for MCL and SECL because now it will go to the concerned departments, the ministries, and it will take a long process to get there. So it is too preliminary to say Whether it is an OFS of 10%, 15%, or through a cash route, or it is fresh, it is too preliminary.” Discussing Coal India’s current price and upside potential, Jhonsa said, “So right now our target price, the last release report, was around Rs 440. So there is still around a 10% upside from current levels. This company has practically interacted with a lot of shareholders and stakeholders over the last few years, but now the ball is finally rolling and that’s actually sentimentally quite positive.” So what’s built into the price, again it all depends on a lot of details, like what they’re actually outsourcing, what the valuation is and so on, because if the valuation is right, there’s definitely more upside. Let’s also wait to see what the company says, what management is going to quote, so it all depends.”
Finally, Jhonsa discussed employee pay reviews and their potential impact. “So I’m thinking about the employee pay review for next year. It usually takes about a year after that, but the process is a long process. The negotiations usually last about a couple of months or a couple of quarters, as we saw last time as well. So there’s definitely going to be some overhang when the employee pay review comes in, but what Coal India is doing is they’re actually taking a lot of people out of the system and that’s how they’re trying to control employee costs, but certainly as a percentage of sales. This is expected to increase in the future.”
With two of its largest subsidiaries heading for IPOs, Coal India appears poised for significant shareholder value creation, although investors will have to wait for final approvals and valuations to fully assess the impact.
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