Why Are Marquee Funds Betting on Bharat Coking Coal IPO?

The Bharat Coking Coal’s historic IPO subscriptions open on Jan 9. While the investors were waiting for the listing, the company made a surprise announcement. On Jan 8, the company successfully mobilised ₹273.13 Cr from a diverse group of anchor investors.

BCCL (Bharat Coking Coal Ltd.) allocated 118,753,500 equity shares. These shares have an allocation price of ₹23 per share, which sits at the upper end of the established price band.

Also, 7.17 Cr shares were allotted to three major domestic mutual funds across eight schemes. These were:

• The LIC (Life Insurance Corporation of India) - securing 28.56% of the anchor portion
• Bandhan Smallcap Mutual Fund and Nippon India Mutual Fund at around 27% each
• Other major participants included UTI Mutual Fund, Societe Generale, Copthall Mauritius, and Citrine Fund

Bharat Coking Coal Ltd. is a ‘Mini Ratna’ company (granted status in 2014) and a wholly owned subsidiary of (CIL) Coal India Ltd. When marquee institutions like LIC and Tier-1 mutual funds commit capital, they function as "quality certifiers." The Bharat Coking Coal IPO anchor book is fully subscribed at the upper price band by heavyweights like LIC and major mutual funds. The important question for the investors is: does this set a robust floor for the maiden public issue of the year?

Why This Investment Matters?

One of the important aspects of this investment is its timing. The fundraising milestone has come just a day before the opening of the Bharat Coking Coal IPO.

The Bharat Coking Coal IPO is scheduled to accept public subscriptions from Jan 9 to Jan 13. The issue is structured entirely as an OFS (Offer for Sale). Here, the parent company, Coal India Ltd. is diluting its stake. At the upper price band of ₹21 – ₹23, the company is aiming to raise around ₹1071 Cr.

BCCL has a dominant position in the domestic landscape. It accounts for 58.5% of India's total coking coal output in FY25. Despite softening in financials, with FY25 revenue at ₹13,802 Cr and a net profit of ₹1,240 Cr, the large scale of its operations in the Jharia and Raniganj coalfields remains attractive to investors.

Furthermore, marquee mutual funds and the nation’s largest insurer have made heavy capital commitments at the upper limit of the price band. This commitment suggests a thorough internal valuation aligning with the company's long-term growth prospects. Generally, these institutions conduct deep-dive due diligence into the subsidiary’s operational efficiency and its parent-subsidiary synergies.

Finally, the presence of global brokerage arms and foreign portfolio investors adds a layer of international validation to the issue. Such a mix of "patient capital" from insurance giants and "agile capital" from foreign funds draws a picture of a balanced investor profile.

Driving Future Valuations

Bharat Coking Coal Ltd.’s long-term value proposition is present in its transition from becoming a raw coal supplier to a value-added energy provider. The company is gradually shifting its focus on its coal washeries.

Coal washeries are important for reducing ash content and making domestic coal suitable for high-end industrial use. Bharat Coking Coal has adopted models like the WDO (Washery Developer and Operator) and MDO (Mine Developer and Operator).

Thus, it is largely outsourcing operational risks as well as focusing on capacity enhancement and resource optimisation. This shift towards "washed coal" is expected to improve the company's margins considerably over time, as processed coal fetches a premium over raw varieties.

A Strategic Sectoral Milestone

A prestigious cohort of investors have made capital commitments, and the company has effectively validated its valuation and strategic importance.

The transition from a wholly owned subsidiary to a listed company can open doors for operational modernisation and market-driven growth.

For the Indian steel industry, Bharat Coking Coal Ltd.’s strength can offer a rare opportunity to participate in a core industrial niche. As the bidding for the general public opens, the momentum generated by the anchor investors will be the primary engine driving the success of this landmark issue.

Investors wait to see if the maiden IPO of the year sets a bullish precedent for the divestment pipeline scheduled by the government for the rest of the fiscal year.

Source:

Business Standard
Livemint
Moneycontrol
CNBC TV18
NDTV Profit