Generally, it is believed that the P/E is in sync with the prospects. For instance, defence gets a high valuation because prospects and order flows are huge. Coal India supplies to the thermal power sector, which continues to dominate India’s power capacity. That cannot run without coal and CIL extracts 80% of India’s coal. As power demand grows due to industrialization, AI, data centres, and rising consumer demand; the story should only get better for Coal India. However, valuations in this case are out of sync with prospects. 

In the last quarter, Coal India output got hit by unseasonal rains. More importantly, its evacuation capacity did not match with its extraction capacity. Extracting coal from the coal mines is one thing. Getting them out of the mines, loading them on rakes, and managing the first mile efficiently is a bigger challenge. Fortunately, that is where Coal India is investing. If you look at the FY25 capex of ₹21,776 crore, a major part of it has gone towards evacuation. For FY26, more than one-third of its capex of ₹16,000 crore is directed at evacuation. CIL is investing heavily in first mile connectivity, rapid loading silos, rail sidings, coal handling etc. This subtle shift is not being factored in. 

Even if we forget the price movement of the company and just focus on the dividends, there is a consistently interesting story. For FY25, Coal India has paid dividends of ₹26 per share. With the current share price at ₹378, the dividend yield translates to an attractive 6.88%. That is a very attractive dividend yield, especially if you consider that the company has consistently maintained this level of dividends. There is more to it. The company is very strong on cash flows and it is a debt free company. So, investors get a high dividend yield, with low debt, and robust cash flows. The low debt and robust cash flows actually magnify the impact of the attractive dividend yield ratio. 

Probably, the big untold story of Coal India may be in its subsidiaries, many of which are likely to be listed in the coming quarters. Two of its key subsidiaries; Bharat Coking Coal Ltd and Central Mine Planning and Design Institute (CMPDI) are likely to come out with an IPO shortly.  Both are rather coveted assets. Bharat Coking Coal owns most of the coking coal mines in India, a key input for steel manufacturing. CMPDI offers geological, mining and environmental expertise, with huge prospects of a separate revenue stream. This is just part of the story; as there are subsidiaries that hold washeries, silos, loading systems, and land parcels and can be easily monetized! Value is surely out of sync!