Coal India's e-auction premiums hit 59% as power plant stocks fall to nine days

Coal India has recovered almost all of the losses that followed a soft June quarter, the first quarter of fiscal year 2027, as steep premiums at its electronic coal auctions lifted investor sentiment, Mint reported. The stock has gained 4% over the past month, while the benchmark Nifty 50 index has declined 5% over the same period.

Morgan Stanley upgraded the state-controlled miner to 'overweight' this week and raised its target price to ₹480, implying 14% upside from current levels. According to Mint, the brokerage expects accelerating thermal power demand, sharply depleted inventories at power plants and rising global thermal coal prices to support both volumes and auction premiums.

Inventories tighten as offtake outpaces output

Physical indicators point to a tighter domestic market. Coal India's offtake rose to 60.6 million tonnes in August, taking year-to-date offtake in FY27 to 323 million tonnes against a full-year target of 850 million tonnes. Coal stocks at power plants fell to around nine days at the end of August, from about 19 days in March. India's power demand rose 13% year-on-year in August, and depleted plant-level stocks could support restocking demand if consumption stays strong.

The tightness stems from a divergence between output and sales. In the first five months of FY27, from April to August, production declined 4.5% while offtake grew 6.7%. The gap was covered by drawing down pithead inventories: around 55 million tonnes were liquidated over the period, leaving roughly 76 million tonnes at the mines.

• August offtake: 60.6 million tonnes
• FY27 year-to-date offtake: 323 million tonnes, against a target of 850 million tonnes
• Power plant stocks: around nine days, down from about 19 days in March
• Pithead inventories: roughly 76 million tonnes after a 55 million tonne drawdown

Revenue grew faster than profit in the June quarter

Operating performance in the June quarter was solid at the top line. Coal offtake rose 4% year-on-year to 198 million tonnes, lifting operating revenue 7.8% to ₹46,255 crore. Profitability was muted, however, as fuel and raw-material costs grew faster than revenue. Net profit was largely flat at ₹8,850 crore.

Auction premiums climb while auction volumes shrink

Coal India's e-auction premium rose to 59% over notified prices in August, compared with an average of 46% so far in FY27. E-auctions allow the company to realize market-linked prices, while a large portion of its deliveries is locked into fixed prices under fuel supply agreements.

Volumes sold through that channel are moving in the opposite direction. E-auction sales fell to 8.3 million tonnes in August from 13.3 million tonnes in March. In the June quarter the company sold 31.1 million tonnes through e-auctions at an average premium of 43%. So far in the second quarter of FY27 the average premium has risen to around 50%, but volumes have fallen to 16.7 million tonnes.

The support may prove temporary. Coal India is targeting 815 million tonnes of production and 850 million tonnes of offtake in FY27, and as output recovers with the retreat of the monsoon, additional supply could ease the scarcity underpinning current premiums.

Mahanadi Coalfields listing adds another variable

The proposed initial public offering of subsidiary Mahanadi Coalfields Ltd introduces a further consideration. Coal India plans to sell up to 10% of MCL through an offer-for-sale. MCL produced 218 million tonnes in FY26, about 28% of Coal India's production. The listing could help unlock value, but would leave the parent with a smaller economic stake in one of its most profitable subsidiaries.

Mint notes that investors will need to monitor production volumes, e-auction volumes and premiums, inventories and margins over the medium to long term. At around 7.6 times FY28 earnings, according to Bloomberg consensus estimates, the valuation offers some cushion against execution risks, and a trailing 12-month dividend yield of more than 6% provides another support.