Coal India Subsidiaries See Sharp Drop in Coal E-Auction Premiums Ahead of IPOs

Coal India Limited’s two prominent subsidiaries, Mahanadi Coalfields Limited (MCL) and South Eastern Coalfields Limited (SECL), have experienced a marked decline in the premiums realized through coal e-auctions over the last two financial years. Both companies are preparing for public listings via initial public offerings (IPOs), which adds significance to these shifts in their auction revenues.

According to the draft red herring prospectus (DRHP) filed by MCL, the average premium per tonne earned over the notified coal price fell drastically from ₹802 in the fiscal year 2023-24 to ₹274 in 2025-26. This represents a drop of nearly 66 percent. The impact on revenue was also substantial, with incremental income from these premiums dropping 60 percent to ₹728 crore in FY26, down from ₹1,833 crore two years earlier.

MCL and SECL are the largest and second-largest coal producers within Coal India’s portfolio, respectively. Their coal sales occur primarily through two channels: fuel supply agreements (FSAs) and competitive e-auctions. FSAs provide a steady revenue base by selling coal at prices fixed by Coal India. E-auctions, in contrast, reflect market demand and supply dynamics, allowing buyers to pay premiums above the benchmark prices set at the start of bidding.

The decline in MCL’s auction premiums occurred despite a significant increase in the amount of coal offered for sale via e-auctions. The company increased its offerings to 72.26 million tonnes in FY26 from 28.65 million tonnes in FY24. However, the quantity actually booked by buyers only increased modestly to 26.49 million tonnes from 22.86 million tonnes. This caused the booking rate to tumble from nearly 80 percent in FY24 to about 37 percent in FY26.

MCL’s DRHP attributes this moderation in average sales realization partly to a shift in sales mix. The share of coal sold under FSAs at fixed notified prices has grown, while the contribution from higher-priced e-auctions has shrunk. Dispatches under FSAs increased by 5.6 percent, rising to 187 million tonnes in FY26 from 177 million tonnes in FY24.

The trend of falling e-auction premiums was also evident at SECL. The average premium per tonne fell by approximately 31 percent, from ₹911.61 in FY24 to ₹631.94 in FY26. While the company increased coal offerings from 30 million tonnes to 49 million tonnes during this period, the quantity booked rose only from 26 million tonnes to 29 million tonnes. The booking rate dropped from roughly 86 percent to 59 percent.

SECL acknowledged the decline in premiums in its DRHP, stating, "Although booked quantities increased significantly during Fiscal 2026, the average premium over notified price moderated relative to earlier years, resulting in lower incremental revenue per tonne. This indicates normalisation of e-auction premiums despite increasing auction participation."

The reduction in premiums and the evolving sales mix come at a critical time as both subsidiaries prepare to enter the stock market. These IPOs are part of Coal India’s broader strategy to partially divest its stakes in its subsidiaries. The decreased premium levels could reflect a more balanced coal market and changing demand dynamics.

Coal India is one of the largest coal producers in the world and holds a dominant position in India’s coal sector, supplying fuel to power plants, steel manufacturers, and other industries. The company’s subsidiaries play a vital role in this ecosystem, and their financial health is closely watched by investors and policymakers alike. The trends in e-auction premiums are an important indicator of market conditions and pricing power within the sector.

As India continues to balance its energy needs with sustainability goals and economic growth, coal remains a significant energy source. Market dynamics such as those seen in MCL and SECL’s auction premiums provide insight into how the country’s coal industry is adjusting to changing conditions. The upcoming IPOs will offer investors a chance to participate directly in these changes, while also providing Coal India with capital to support its operations and strategic objectives.