Nuvama upgrades Coal India to Buy, raises target to ₹501 on e-auction premium surge

The brokerage noted that higher thermal power generation, lower coal inventories at power plants, and elevated imported coal prices supported the growth. Factoring in improved volumes and e-auction prices, Nuvama raised its FY27 and FY28 EBITDA estimates by 6% and 4%, respectively. The stock currently trades at around 4.1x FY28E EV/EBITDA and offers an estimated 6% dividend yield.

Coal India’s average e-auction premium over the notified price rose sharply to 94% in September, up from 59% in August and 34% a year earlier. This increase was driven by domestic coal shortages and higher imported coal prices. The proportion of coal offered through e-auctions also rose to 72% in September, up from 40% in H1 FY27, indicating stronger customer demand. Nuvama expects e-auction premiums to remain firm in Q3 FY27 due to elevated global coal prices and robust domestic demand.

As a result, Nuvama has raised its FY27 average e-auction premium assumption to 60% from 51%, while projecting premiums of 60% for FY27 and 49% for FY28, compared to 42% in FY26. The brokerage now factors in 7% year-on-year volume growth to 796 million tonnes for FY27, followed by 4.5% growth to 832 million tonnes in FY28.

Nuvama also highlighted the proposed listing of Coal India’s subsidiary, Mahanadi Coalfields Ltd (MCL), as a potential value-unlocking trigger. MCL accounted for about 28% of Coal India’s total volume and 31% of EBITDA (excluding overburden removal) in FY26. The brokerage expects MCL to command a valuation above 6x EV/EBITDA due to stronger margins and return ratios, which could trigger a valuation re-rating for Coal India, currently trading below its three-year average of 5.1x EV/EBITDA.