Coal India Subsidiaries MCL and SECL See E-Auction Premiums Drop up to 66% Ahead of IPOs
Draft prospectus filings by Coal India Limited's (CIL) two largest operating subsidiaries reveal a sharp fall in coal e-auction premiums over the past two fiscal years, pointing to a normalisation in spot pricing and booking demand ahead of their proposed initial public offerings (IPOs).
According to the Draft Red Herring Prospectus (DRHP) documents submitted to the Securities and Exchange Board of India (SEBI), average auction realisations at Mahanadi Coalfields Limited (MCL) and South Eastern Coalfields Limited (SECL) contracted substantially between FY24 and FY26 despite large increases in the coal volumes placed on the auction block.
MCL Premiums and Booking Rates Fall Sharply
Mahanadi Coalfields, India's single largest coal-producing subsidiary, saw its average premium over the notified price drop by nearly 66%, tumbling to ₹274 per tonne in FY26 from ₹802 per tonne in FY24.
As a result of lower bid premiums, incremental revenue generated through e-auction premiums fell 60% to ₹728 crore in FY26 compared to ₹1,833 crore in FY24.
The fall occurred even as MCL expanded the volume of coal made available to commercial buyers:
- Coal offered via e-auctions climbed from 28.65 million tonnes (MT) in FY24 to 72.26 MT in FY26.
- Volumes booked by buyers grew at a far slower pace, moving from 22.86 MT to 26.49 MT over the period.
- The booking proportion of offered coal declined from nearly 80% in FY24 to roughly 37% in FY26.
In its DRHP, MCL stated that the moderation in average sales realisation was driven partly by an altered sales mix, with higher volumes routed through Fuel Supply Agreements (FSAs) at notified prices and lower contributions from premium-yielding e-auctions. Dispatches under FSAs increased 5.6% from 177 MT in FY24 to 187 MT in FY26.
SECL Discloses Similar Spread Contraction
SECL, Coal India's second-largest subsidiary by volume, reported a similar trend in its draft prospectus. The average e-auction premium at SECL slid by approximately 31%, dropping from ₹911.61 per tonne in FY24 to ₹631.94 per tonne in FY26.
Key auction operational metrics for SECL show:
- Quantity offered through e-auctions rose from 30 MT in FY24 to 49 MT in FY26.
- Quantity booked increased moderately from 26 MT in FY24 to 29 MT in FY26.
- The booking success rate fell from about 86% in FY24 to 59% in FY26.
SECL noted in its filing that while booked quantities grew in FY26, the average premium over notified prices moderated, resulting in lower incremental revenue per tonne and signaling a normalisation of premiums despite wider auction participation.
Value Unlocking and Market Impact
CIL subsidiaries dispatch coal through two main mechanisms: fixed-price Fuel Supply Agreements (FSAs) and competitive e-auction windows. Under FSAs, notified prices offer steady baseload volumes, whereas e-auctions reflect spot supply-demand conditions. Because production costs per tonne remain largely unchanged regardless of distribution channel, e-auction premiums typically drive a disproportionate share of operating margins and cash flows.
The cooling of premiums between FY24 and FY26 follows easing domestic availability and reduced urgency from non-power industrial consumers.
Both proposed public issues are structured entirely as Offers for Sale (OFS). Coal India plans to sell a 10% stake in MCL, amounting to up to 661.84 million shares, and a 10% stake in SECL, comprising up to 66.81 crore shares. The proceeds will flow directly to the parent company. With the draft papers under review by SEBI, institutional and retail investors will be watching whether e-auction realizations stabilise during FY27 to support prospective valuations.
