Coal India Limited (CIL) Q2 FY26 Results & Dividend – A Detailed Analysis

1. Executive summary

In the second quarter (July–Sept) of FY26, Coal India reported a net profit of ₹4,262.64 crore, marking a decline of ~32 % year‐on‐year (YoY) from ₹6,274.80 crore in Q2 FY25.
Revenue from operations stood at ₹30,186.7 crore, down ~3.2 % YoY.
Despite the weaker performance, the company announced a 2nd interim dividend of ₹10.25 per share (face value ₹10) ― a payout ratio of ~102 %.
Record date: 4 November 2025; Payment by 28 November 2025.
Overall, the quarter reflects operational and margin pressure but maintains shareholder returns.

2. Key financials and metrics

Here are the salient numbers:

Additional notes:

• EBITDA was ~₹6,716 crore in Q2 FY26, down from prior year levels.
• Margin contraction: EBITDA margin fell to ~22.2% (or ~22.3%) from higher levels previously.

3. What went well, what didn’t

✅ Positive aspects

• Shareholder friendly: Despite the tough quarter, Coal India maintained a hefty dividend payout (₹10.25/share). This illustrates strong cash flow / shareholder return orientation.
• Slight revenue beat: Some sources suggest the revenue number was marginally better than market expectation (₹30,187 crore vs estimate ~₹28,910 crore) though still down.
• Government policy tailwind: With coal GST rate hike from 5% to 18% (from 22 Sept 2025) the company expects to utilise accumulated input tax credit (~₹18,133 crore) and resolve the “inverted duty” issue.

🚫 Challenges

• Decline in profit led by higher costs and weaker realisations. Expenses rose ~7% YoY while revenue fell.
• Production and offtake slipped. For example, September production down ~3.9% YoY.
• E-auction realisation (though not in all sources) shows pressure: Other sources mention that e-auction premiums and offtake in auctions were weaker. (See Reuters piece)
• Broader industry headwinds: Thermal coal demand has softened, power plants drawing from inventory instead of fresh purchase.

4. Dividend – deep dive & implications

The company’s decision to announce a second interim dividend of ₹10.25 per share is a standout. Key points:

• Face value is ₹10/share. So dividend payout is equivalent to 102.5% of face value (i.e., ₹10.25 on a ₹10 face value).
• Record date: 4 November 2025. Shareholders on record will receive the dividend by 28 November 2025.
• Significance: Despite a sharp drop in profits, the dividend shows that the company is maintaining its reward to shareholders. For many investors in PSUs, consistent dividend payouts are a key attraction.
• Yield impact: Depending on the market price of the stock at record date time, dividend yield can be a meaningful factor for income investors.
• Strategic message: The company is signalling confidence in its balance sheet and future cash flows even in a challenging quarter.

Investor takeaways regarding dividend:

• If you hold the stock and qualify by the record date, you’ll receive the dividend even though the quarter was weak.
• For potential investors, the dividend can provide some cushion, but should not overshadow the weak underlying performance.
• One must evaluate sustainability: Is the high dividend sustainable when profits and margins are under pressure?

5. Broader strategic & sectoral context

Understanding CIL’s quarter requires seeing it in broader context:

a) Role in India’s energy chain

Coal India is a Maharatna PSU and dominates India’s domestic coal production. Its performance has ripple effects on the power sector, mining sector, and PSU investor sentiment.

b) Demand dynamics

• Thermal coal demand: Power plants in India reportedly were drawing from existing coal inventory, reducing fresh purchases from Coal India. Thus off­take fell.
• Output disruption: Heavy rainfall in September impacted production operations.
• Price realisation: For the e-auction segment, the premium per tonne declined (from ₹2,453.92/ton to ₹2,292.40/ton in one cited piece) thereby pulling down margins.

c) Cost‐side pressures

• Logistics, overburden removal, labour, diesel and other input costs in mining are rising. Margin contraction suggests cost escalation eroded benefit of any realisation improvements.
• The GST regime shift (coal GST from 5%→18%) will help long‐term but short‐term transitional impact, input tax credit utilisation etc still being managed.

d) Policy & regulatory outlook

• Government push for import substitution of coal, ramping up domestic capacity, evacuating new mines, mine clearances etc will influence future of CIL.
• Environmental, regulatory pressure: With India’s net-zero ambitions, even coal sector players must brace for transition and possibly diversify.

e) Peer / sector comparison

Though this blog is focused on Coal India, investors may compare performance with other mining/PSU players to gauge relative execution and growth. CIL’s drop in profit raises questions whether peers will also face similar pressure or if CIL will lag due to structural issues.

6. Implications for investors

Based on the data and context, here are implications and action points for different types of investors:

➡️ Existing shareholders

• Good news: The dividend offers a return even when company performance is weak. If you are a long-term investor focussed on income, this is positive.
• Caution: Profit and margin trends are weak. Monitor future quarters to see if the decline is temporary or structural.
• Check fundamentals: Are production volumes recovering? Are costs under control? Is demand turning around?

➡️ Potential new investors

• Dividend yield may be attractive, but entering purely for dividend in a company whose core business is under pressure can be risky.
• Valuation: With weaker profit and pressure ahead, assess valuation – is the stock priced for recovery or further decline?
• Time horizon: If you believe in India’s coal demand stability (despite transition) and Coal India’s ability to improve operations, then this may be opportunity; else, caution warranted.

➡️ Income/investment strategy

• For investors seeking regular income: This dividend payout is meaningful, but the sustainability must be judged. If future profits keep falling, the dividend may come under stress.
• For growth investors: Focus less on dividend, more on growth in volume, realisations, new mine capacity, cost innovations, and diversification (renewables/ancillary business).

7. Risks & what to watch

Key risks

• Demand risk: If thermal power demand continues to soften (due to renewables, hydel, gas or imported coal) volumes and prices could suffer.
• Cost inflation: Mining is cost-intensive. Rising labour, diesel, logistics, regulatory compliances, and asset maintenance can hurt margins further.
• Production disruptions: Weather (monsoon, floods), regulatory clearances, etc can disrupt output (as seen in this quarter).
• Policy/transition risk: Shift to cleaner energy could reduce long-term coal demand. Domestic coal producers need to adapt.
• Dividend sustainability: The huge payout in a weak quarter may raise questions about whether the company will maintain same payouts if profits don’t recover.

Metrics to monitor

• Production and offtake volumes each month.
• Realisation per tonne (especially in e-auction and captive/long‐term contracts).
• Cost per tonne and total expenses.
• Profit margins (EBITDA, PAT) and how they trend.
• Capex and new mine capacity addition.
• Policy/regulatory updates (GST, mine clearances, environmental norms).
• Dividend declarations and payout ratio relative to cash flows.

8. Outlook & verdict

Looking ahead, the quarter highlights a mixed outlook:

• On one hand, the core business is under pressure: falling volumes, weaker revenue, rising costs, margin squeeze.
• On the other hand, the company continues to return cash to shareholders (dividend), and policy tailwinds (GST adjustment) may help.
• The key will be whether Coal India can stabilise production, improve cost efficiency, and maintain/boost realisations in coming quarters.
• For long-term investors, the question is whether the current dip is a cyclical low or the start of a structural decline in profitability for the coal business.

Verdict: While the dividend is appealing, the weak earnings caution that this is not a simple buy-and-forget income stock. Investors should keep a watchful eye on execution, volume recovery, cost control and sector shifts. If those turn positive, the stock could be interesting; if they deteriorate, risk of further downside remains.

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