Coal India Chooses Ops Expertise over Strategic Transformation

Anyone waiting for Coal India to transform into a diversified energy company might keep hoping. The world's largest coal producer has appointed B. Sairam as Chairman, a logistics specialist with 35 years optimising coal operations, not an executive who's built solar farms or battery plants. That choice tells stakeholders much about management's priorities, regardless of the rhetoric on renewable energy in quarterly presentations.

The stock, trading at ₹385, has lagged the Nifty 50 by 15 percentage points over twelve months. At 7 times earnings yielding 6.9%, Coal India prices as what it is: a cash cow in structural decline. Sairam’s appointment reinforces continuity, and the company will likely get better at moving coal than becoming a new-age energy play.

To be fair, at Central Coalfields, where the new chairman comes from, he tripled the Tori-Shivpur rail line's capacity, directly boosting dispatch. That matters when the company keeps missing production targets. The output of 781 million tonnes in 2024-2025 fell 57 million tonnes short of target, the third consecutive year of underperformance. The aspirational 1-billion-tonne milestone, originally set for 2023-24, has slipped in 2025-2026 and will likely slip again.

If the board wanted someone to slow the slide in coal production, Sairam might be that person. He will accelerate the ₹247.5 billion First Mile Connectivity programme, mechanised conveyor systems replacing truck transport. His experience navigating forest and environment ministry clearances helps as captive mining companies, now holding 19% market share versus 9% five years ago, develop their own coal blocks.

But operational excellence can't fix broken economics. Coal India's second-quarter net profit fell 33% to ₹42.6 billion. Global thermal coal prices crashed nearly 75% from 2022 peaks above $400 per tonne to around $100-110 currently. Worse, the company operates as a price taker on over 85% of its business through fuel supply agreement at government-regulated prices. The remaining 10%-15% is sold through market-priced e-auctions where the premiums have fallen from an average of nearly 250% over regulated prices in 2022 to nearly 60%-70% in the current fiscal 2025-2026.

Conflicting policies make strategic planning difficult. India's National Electricity Plan 2023 projects renewable capacity tripling to 500 gigawatts by 2030 while coal's electricity share drops from 73% to 55%. The same government simultaneously plans 80 gigawatts of new coal capacity by 2031-32. Now add the proposed Electricity Amendment Bill 2025, which mandates eliminating industrial cross-subsidies within five years, removing pricing distortions that inflated coal demand. The bill also recognises energy storage systems and strengthens renewable procurement requirements.

Should management follow renewable targets, coal expansion plans, or prepare for subsidy elimination? The appear to be choosing coal.

Consider what Coal India has actually delivered on diversification. In 2017, government entrusted Coal India with developing 3,000 MW of solar capacity by 2024. By November 2025, just 210 MW was installed—7% execution across eight years and three management teams. The Khattali Chotti graphite block, the company's entry into critical minerals, faces a four-year timeline before production starts, with no processing capability or integration strategy.

Meanwhile, renewable investment in India reached $11.8 billion in the first half of 2025, on track to double to $32 billion for the year. Some 73 gigawatts of solar and wind projects went to tender, exceeding the government's 50-gigawatt annual target. Battery costs fell 93% since 2010 to $108 per kilowatt-hour in 2025, the threshold where renewables plus storage compete with coal-fired baseload. Coal's share of installed capacity fell to 45% by August 2025, down from 47% at year-end 2024. Coal India’s operating cash flow was ₹292 billion in 2024-2025, enough to build nearly 10 gigawatts of solar capacity. It's spending that money optimizing coal transport.

Coal India offers a 6.9% dividend yield backed by free cash flow for shareholders willing to own a declining business run by competent managers. The new Chairman will probably improve production metrics and stabilise market share through superior execution. But operational competence, despite its obvious worth, is not strategic repositioning. The company is allocating capital to coal infrastructure through 2040 while government policy dismantles pricing structures supporting coal demand. At 7 times earnings, the market is pricing in the perception that Coal India is becoming operationally excellent at managing its own obsolescence. Stakeholders should understand the Coal India for where it is headed and what it will never be.