CIL earnings may stay under pressure amid weak volumes, market share loss

CIL earnings may stay under pressure in FY26 due to weak volumes, lower e-auction prices, rising costs, and growing market share of captive and commercial miners

Coal India’s (CIL’s) earnings are likely to remain under pressure during the April-June quarter (Q1) of FY26 due to lack of volume growth and loss in market share to captive coal producers in April–May 2025.

 

There may also be a fall in e-auction prices, due to weak global trends. Rising production from captives could make it hard to sustain volume growth.

 

Sales volume was down 4.7 per cent year-on-year (Y-o-Y) during April–May and there seems to be volume reduction even in June 2025.

 

Apart from muted power demand, volumes from captive and commercial mines rose 14.5 per cent to 35 million tonnes (MT) and captured 20 per cent of demand. This is against 17.5 per cent in April–May 2024.

 

During FY25, captives produced 197 MT (up 31 per cent over FY24) and this is likely to rise in FY26.

 

The Ministry of Coal assesses capacity of mines allotted so far at 575 MT per annum. This is a long-term competition for CIL.

 

Cost of production is also likely to increase at around 4 per cent compound annual growth rate (CAGR) through FY27. 

 

CIL had an inventory of 112 MT during May 2025 end (May 2024 inventory was 82 MT; average FY20–25 inventory 83 MT), which restricts major volume growth.

 

The management guided for an increase in stripping ratio (the amount of overburden which must be removed per unit weight of coal) to 2.67x (FY25: 2.58x; FY20–25 average: 2.31x), which will increase production costs.

 

In addition, FY27 will see higher employee costs since the next wage revision is due in June 2026.

 

Global coal prices are trending down with benchmark Indonesia thermal at $115 per tonne. Further falls are possible (during Covid FY20 and FY21, Indonesia prices bottomed at $62).

 

CIL’s e-auction price trends correlate to global prices. In Q4FY25, average e-auction per tonne price was ₹2,615, which has fallen to ₹2,200–2,300 now. Lower e-auction realisations will impact profitability. 

 

CIL reported a flat performance in Q4FY25, with revenue declining 1 per cent Y-o-Y to ₹37,800 crore. Profit after tax (PAT) grew 12.5 per cent to ₹9,600 crore.

 

Production declined 2 per cent to 238 MT, while offtake was stable at 201 MT.

 

For FY25, total production rose marginally by 0.96 per cent to 781 MT missing the 838 MT target guidance by 7 per cent.

 

Earnings before interest, taxes, depreciation and amortisation (Ebitda) increased 3.5 per cent to ₹11,800 crore with depreciation up 47 per cent to ₹2,800 crore. Other income rose 75 per cent to ₹3,900 crore, boosting PAT.

 

Fuel supply agreement (FSA) volume declined marginally by 0.5 per cent to 175 MT but e-auction volumes fell 4 per cent to 21.6 MT.

 

Per tonne FSA realisation improved 0.8 per cent to ₹1,547 while e-auction realisation improved 2 per cent to ₹2,615 with e-auction premiums at 69 per cent over FSA for Q4. The overall per tonne realisation was ₹1,702 in Q4FY25 versus ₹1,698 in Q4FY24.

 

CIL’s FY25 reported PAT was ₹35,300 crore (down 6 per cent), with adjusted Ebitda (except overburden removal) declining 11 per cent to ₹26,500 crore.

 

Overall volume growth was up marginally at 1.3 per cent for FY25, with lower average realisations down 3.8 per cent.

 

Some analysts are positive on CIL for the long term. This is given an expected 32 Gw increase in thermal power capacities and better evacuation infrastructure for coal.

 

CIL has a healthy balance sheet and a strong record in dividend payouts. Based on history, dividends could aggregate to over ₹26 annually.