Steel over power: Is Bharat Coking Coal’s IPO strategy worth a bet?

BCCL, incorporated in 1972, is India’s largest producer of coking coal and plays a strategic role in CIL’s portfolio. The company has an estimated 7.91 billion tonnes of reserves as of 1 April 2024, making it one of the country’s biggest holders of coking coal resources. Its operations are concentrated in the premium coal belts of Jharia and Raniganj, where it runs 34 active mines—four underground mines, 26 opencast mines, and four mixed mines—which makes it a critical supplier to steel and power producers.

The listing is part of CIL's broader move to eventually take its other large subsidiaries—Mahanadi Coalfields Ltd (MCL) and South Eastern Coalfields Ltd (SECL)—to public markets in the coming years.

IPO details

The IPO opens on 9 January and closes on 13 January, with a price band of ₹21- ₹23 per share. The entire issue is an offer for sale (OFS) of 465.7 million shares, amounting to ₹1,071 crore. Since it is an OFS, the proceeds will go to its parent, CIL.

CIL plans to deploy these funds across new areas of growth. “We have nearly ₹1 trillion of investments planned over the next five years across renewables, coal gasification, rare earths, and critical minerals," Sanjay Kumar Singh, director (technical), told Mint. “Proceeds from the IPO will also support these initiatives."

Shift towards steel

BCCL produces three main products: coking coal, non-coking coal, and washed coal, but because its coking coal has high ash content, much of it is currently consumed by power producers rather than steelmakers. Non-coking coal is used by power plants, cement makers, fertilizer producers, and glass manufacturers. Washed coal, which has lower ash and better quality, is suitable for steel production and premium power generation.

In 2024-25, the company produced 38.9 million tonnes (mt) of coking coal out of the total production of 66.5 mt, giving it a 58.5% market share in the country's coking coal segment. Output has grown steadily from 30.51 mt 2021-22 to 40.50 mt in 2024-25, a rise of 32.7% in three years.

BCCL now plans to direct all future incremental output to the steel sector. “Of the 40 mt we produce today, around 28-29 mt are supplied to power producers, and that volume will remain constant. The growth from 40 to 56 mt and an additional 16 mt will be fully allocated to the steel industry," said Singh. “This will come either through washed coking coal from our washeries or via NRS (non-regulated sector) linkages where steel plants take raw coal and wash it themselves. In short, the entire incremental output goes to steel," he added.

A major part of BCCL’s steel-focused strategy is increasing its washed coal capacity. “The company is expanding its washery capacity to 20.65 mtpa from the current 13.65 mtpa," said Sunny Agrawal, head of fundamental research, SBI Securities. This includes new washeries as well as a full renovation of the existing Moonidih washery, which will double its capacity from 0.8 mtpa to 1.6 mtpa.

Market participants say this expansion aligns with the steel industry’s shift towards higher-quality coal. “BCCL is focused on increasing washed coking coal output, with planned expansion from 13.65 mt to around 27 mt," said Sachin Jasuja, head of equities of Centricity WealthTech. “Management has also indicated plans to scale overall production to 54 mt 2029-30."

Weather toll

While the long-term plans are progressing, the near-term has been challenging. Coking coal output fell to 15.05mt in the first half of 2025-26, compared with 18.39mt a year earlier. Management attributed this mainly to extreme rainfall. “This year recorded the highest rainfall in the last 50 years," Singh said. “Both the duration and intensity severely impacted our open-cast mining."

Its financial impact was visible, too. Between 2022-23 and 2024-25, BCCL’s key headline numbers, revenue, Ebitda, and profit after tax (PAT), grew at a compound annual growth rate of 4.6%, 62.6%, and 36.6%, respectively. But in H1FY26, revenue fell 17% year-on-year to ₹5,659 crore, Ebitda dropped 66% to ₹460 crore, and PAT declined 83.5% to ₹124 crore. Ebitda is short for earnings before interest, taxes, depreciation and amortization.

This weakness was driven by more than weather alone, according to analysts. “Profitability has been affected by soft global coal prices and rising operating costs," said Ravi Singh of Master Capital Services. He added that mature coalfields, such as Jharia, require deeper mining and higher stripping ratios, which push up costs.

Jasuja added that lower realizations linked to global coking coal benchmarks and slower sales to steelmakers also weighed on margins.

Receivables worry

Growing receivables, amounts owed to a company by its customers, adds to the worry. Trade receivables increased from ₹1,251 crore in 2022-23 to ₹2,203 crore in H1FY26. Receivable days also went up from 36 days to 60 days.

“Receivables rose mainly due to disputed performance-incentive amounts and delayed payments from power-sector customers," said Jasuja. “This reflects timing issues rather than weaker credit quality."

Power centric

Another risk emanates from its narrow base. Power customers accounted for 75.5% of revenue in H1FY26, up from 64.9% in 2022-23. Steel companies contributed only 18.5%, a share that has remained largely unchanged. Among BCCL’s top 10 customers, only SAIL is from the steel sector; the rest are power utilities. This shows BCCL needs to bridge a significant gap to meet its goal of directing all future incremental output to the steel sector.

This concentration also poses a long-term risk, especially as India pushes for more renewable energy. The government aims for 50% of installed capacity from clean sources by 2030.

However, management believes the risk is manageable. “We are not increasing supplies to power customers beyond current levels," Singh said. “All future growth is targeted at the steel sector, which reduces long-term exposure to renewables."

He added that even with growth in renewable energy, India’s overall electricity demand is rising. “Coal demand growth may moderate, but we do not expect negative growth."

Robust demand

Meanwhile, the company is well-placed with a strong demand outlook from the steel and power segment. Coal demand grew at a 3.8% CAGR between 2014-15 and 2023-24 and is expected to grow 4.1% between 2023-24 and 2029-30. More than 60% of this demand will come from the thermal and captive power sectors.

According to Jasuja, BCCL is well-positioned. “BCCL remains the largest domestic supplier of coking coal to the steel industry. As washed coal capacity expands and steel demand grows, a greater share of high-value steel-grade coal is expected."