Blasé Capital BLACK GOLD

It is possibly one of the most successful IPOs (Initial Public Offerings) in the recent past. As the shares of Bharat Coking Coal will be listed on the exchanges today, the interest has shifted from the huge oversubscription to the listing gains on the first day. Few issues received such attention from both retail and institutional investors. Despite the small size of the issue, `1,000 crore or so, the amount bid for was more than INR1,00,000 crore. The qualified institutions’ portion was subscribed by more than 300 times. The retail one received money that was nearly 50 times more than its share. Throughout the pre-IPO, and IPO periods, the grey market, which is indicative of a possible listing price, gave it a huge thumbs up, with a premium of 50-60 per cent. At last count, the share was expected to list INR13 over its INR23 upper offer price.

However, analysts seem cautious, rather than gung-ho about the future of the stock. A few categorically advise the allottees to book partial profits on the first day of the listing, and retain the rest for the long haul. Another advises that those with a short-term perspective should sell the entire quantity, if the listing gains, as estimated, are 40-60 per cent above the offer price. Only those with a long-term perspective should hold on to the shares. One of the experts contends that “valuations appear fully-priced at the upper end of the issue price (INR23).” Hence, investors need to get out at a lucrative price. Another one warned that while the stock looks attractive, the coal sector is a cyclical business, and a downturn is invariably round the corner. One cannot confidently predict the future. According to most analysts, the grey market premium of INR13 possibly indicates the maximum listing gain, which may be a lower `9.

One needs to remember that the IPO offers no benefits to the firm, which is a subsidiary of the state-owned Coal India. The entire amount will be booked by the parent, which will dilute its stake in Bharat Coking Coal. There is no offer of additional shares, which may have gone into the IPO firm’s kitty to fund future growth, expansion, investments, or possible corporate actions. Indeed, the prospectus candidly admits that the main objective is to achieve the positives of listing on the exchanges, which may deepen engagement with outside investors, add liquidity to the stock, which was completely owned by Coal India, and enable it to raise money in the future for possible expansion. Since Coal India is owned by the Government, the IPO is possibly a small attempt to shore up official revenues, which are under pressure due to low GST collections. This, and other more substantial measures to hike revenues through non-tax means may help the finance minister to manage the fiscal deficit in 2025-26, according to some rating agencies, and analysts.

Bharat Coking Coal was the largest producer of coking coal in FY-25, and contributed nearly 60 per cent of the overall output. Its reserves are nearly 8,000 million tonnes, as in 2024, which puts it “among the biggest holders of coking coal reserves in the country.” It produces multiple grades, along with non-coking coal and washed coal, with the steel and power sectors being its major buyers. Its main coalfields are in the states of Jharkhand and West Bengal. The prospectus states that the firm expanded over the years, as coal production increased to nearly 33 million tonnes in FY-22 to nearly 16 million tonnes in the first half of 2025-26. The production in the first half of the previous financial year was just over 19 million tonnes, which indicates a drop in the recent financial year. FY-24 was the best year in recent times, with a record annual production of 39 million tonnes, which was 11 per cent higher than the previous best in FY-17.

Its top 10 buyers constitute more than 80 per cent of the sales, and the “loss of any of these customers could have an adverse effect on our business, financial condition, results of operations, and cash flows,” states the prospectus. Most of these buyers, as per the data related to the first six months of the ongoing financial year, include state-owned firms such as Steel Authority of India, NTPC, Uttar Pradesh Rajya Vidyut Utpadan Nigam, Punjab State Power Corporation. This, adds the prospectus, “exposes us to certain risks inherent in operating with PSUs (public sector undertakings). PSUs are subject to unique operational and regulatory constraints, including budgetary limitations, bureaucratic decision-making processes, and potential changes in government policies or priorities.” In addition, one of the top 10 customers “started their own captive coal production, and their requirement from our Company ceased.” Hence, Bharat Coking Coal simply lost one of its main buyers. Similarly, its supply deal with another of the top 10 customers expired in April 2025. “The loss of our major customers could necessitate the reallocation of resources, and efforts to acquire new customers. In the case of the fuel supply loss, the firm claims that it found new steel consumers, whose needs exceeded the loss in sales.