Company Overview & Offer
Bharat Coking Coal Limited (BCCL), the leading coking coal producer in India, initiated its Initial Public Offering (IPO) at a moment when investors favored
businesses with assured demand and consistent cash flows. As a state-owned enterprise in the energy sector, BCCL benefits from predictable offtake and established operations. The IPO aimed to unlock embedded value, providing immediate cash inflows, potential for parent company rerating, and growth at the subsidiary level. The company's strategic location of mines and substantial washery capacity further support its operational capabilities. The IPO received over 2.29 times subscription on the first day, with strong demand from Non-Institutional Investors (NII).
Financial Performance Analysis
BCCL exhibited strong financial performance during the period of FY23–FY25, with revenue, EBITDA, and Profit After Tax (PAT) Compound Annual Growth Rates (CAGRs) of 4.6%, 88.1%, and 36.6%, respectively. The company is valued at ~8.64x Price-to-Earnings (P/E) on FY25 earnings at the upper band. At the upper price band of Rs 23, the issue is valued at an Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA) multiple of 6.4x on a post-issue basis. The financial metrics and the valuation were deemed reasonable, with recommendations to subscribe to the IPO for potential listing gains. The issue got fully subscribed within half an hour of bidding due to strong NII demand. Key financial ratios and data were crucial for investors evaluating the IPO.
Market Position & Strategy
BCCL, which accounts for 58.5% of the domestic output in FY25, is India's largest producer of coking coal. Its strategy includes expanding washery capacity to 20.65 MTPA from 13.65 MTPA. This is achieved by establishing new washeries and upgrading the Moonidih washery, which is expected to double its capacity to 1.6 MTPA. With estimated reserves of 7.91 billion tonnes and 34 operational mines, the company holds a significant position in the coking coal sector. The strong parentage and clear growth strategies also played a crucial role. Exploring prospects in Coal Bed Methane (CBM) projects represents additional growth opportunities for the company. The issue was oversubscribed, with more than 8x subscription on Day 1, demonstrating the confidence investors had in the company's future.
Investment Considerations
Investors contemplating the BCCL IPO were advised to consider factors like valuation support and earnings visibility rather than aggressive growth projections. Experts generally suggested subscribing to the IPO, based on its potential for near-term listing performance or stability-driven exposure rather than focusing on long-term, high-growth opportunities. While the coal sector faces cyclicality, regulatory oversight, and cost pressures, these were considered relatively well-understood risks, which were largely priced in. The IPO's success was evident by the significant oversubscription, with the issue getting fully subscribed within the first few hours on the opening day, including a stable Grey Market Premium (GMP) of 39%, reflecting the positive market sentiment and investment potential of BCCL.
