Coal India Profit Declines 32.6% in Q2, Announces Rs 10.25 Dividend Amid GST Changes

Coal India Limited announced its financial results for the second quarter of fiscal year 2025-26 (Q2 FY26), revealing a significant 32.6% year-on-year decrease in net profit, which stood at Rs 4,262.64 crore compared to Rs 6,274.80 crore in the same period last fiscal. On a sequential basis, the profit saw a sharper decline of 51.20% from Rs 8,734.17 crore in the June quarter.

Revenue from operations also experienced a downturn, decreasing by 3% year-on-year and 15.78% quarter-on-quarter, to Rs 30,186.70 crore. The company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) was reported at Rs 6,716 crore, with operating margins at 22.2%.

Despite the dip in profitability, Coal India declared a second interim dividend of Rs 10.25 per share (102.5%) for FY2025-26. The record date for dividend eligibility is November 4, 2025, with payments expected by November 28, 2025. This follows a first interim dividend of Rs 5.50 per share paid in July.

The company also noted the impact of the Goods and Services Tax (GST) rate increase on coal from 5% to 18%, effective September 22, 2025. This change is anticipated to resolve the issue of an inverted duty structure and enable Coal India to utilize its accumulated Input Tax Credit (ITC) of approximately Rs 18,133 crore against its output tax liabilities.

Impact The decline in profit might be a point of concern for investors in the short term. However, the declaration of a substantial interim dividend provides a positive cash return to shareholders. The strategic utilization of accumulated Input Tax Credit due to the GST hike is a positive development for the company's financial management and operational efficiency. The market may weigh the profit decline against the dividend payout and the positive tax credit utilization. Impact rating: 7/10

Difficult Terms:

Net Profit: The profit remaining after all expenses and taxes have been deducted from total revenue.

Revenue from Operations: The total income generated from the company's primary business activities.

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance before considering financing costs, taxes, and non-cash expenses.

Margins: The profitability ratio indicating the percentage of revenue that remains after deducting costs.

Interim Dividend: A dividend paid to shareholders during the financial year, before the final annual dividend.

Record Date: The specified date to determine which shareholders are eligible to receive a dividend.

GST Rate Hike: An increase in the tax rate under the Goods and Services Tax regime.

Input Tax Credit (ITC): A credit that businesses can claim for taxes they have paid on inputs used in their business, reducing their final tax liability.

Inverted Duty Structure: A situation where the tax rate on inputs is higher than the tax rate on finished goods, leading to tax credit accumulation.