NLC India Ltd Q2 FY26 – When a Coal Dinosaur Tries to Go Solar and Ends Up Powering Half of Tamil Nadu with Sarcasm

1. At a Glance

NLC India Ltd — the government’s favourite pyromaniac that burns dirt to create light — just reported a quarter that can be described as “powerful… but not exactly electrifying.” The ₹34,937 crore Navratna PSU from Neyveli lit up Q2 FY26 with revenue of ₹4,178 crore (up 14.2% YoY), but PAT of ₹665 crore fizzled out with a 27% decline. The stock now trades at ₹252, with a P/E of 13.4x — roughly the price you pay for nostalgia and coal dust.

Return on Equity stands at 14.5%, proving that even government-owned dinosaurs can occasionally jog. The market, however, seems less impressed — the 3-month return is a sleepy 4.07%. With a ₹22,429 crore debt mountain and ₹57,045 crore enterprise value, NLC still manages a respectable EV/EBITDA of 8.73x.

The company’s power generation dropped to 21,644 MU in FY24, down from 25,022 MU in FY22 — maybe the machines just needed a chai break. Yet, thanks to higher tariffs (₹5.6/unit vs ₹4.67 two years ago), revenues stayed firm. Welcome to the world of NLC India — where declining volumes somehow lead to stable profits and even more ambitious renewable promises.

2. Introduction

Once upon a time, in the deep brown pits of Tamil Nadu, the government discovered that you could dig up soft coal (a.k.a. lignite), set it on fire, and call it “power generation.” Thus, Neyveli Lignite Corporation (now NLC India) was born — a PSU so old that it’s practically the geological ancestor of modern discoms.

Fast forward to FY26, and this Navratna giant is juggling three identities — miner, power producer, and renewable hopeful. On one side, it’s burning 30 million tonnes of lignite every year. On the other, it’s installing solar panels faster than your neighbour installs solar water heaters. Somewhere in between, it’s also bidding for coal blocks in Odisha while dreaming about methanol, green hydrogen, and M-Sand. Because why not — diversification is the new PSU yoga.

The irony? Even as it brags about green energy, the company’s debt-to-equity ratio stands at 1.2x. That’s not leverage — that’s adrenaline. The market doesn’t seem too alarmed though. Maybe because PSUs have the same plot armour as Bollywood heroes — they may stumble, but they never truly die.

So buckle up, because this story has everything: mining drama, renewable romance, government interference, and financial twists that would make even Netflix jealous.

3. Business Model – WTF Do They Even Do?

Imagine if your local electricity board and a coal miner had a baby — that’s NLC India.

The company makes money through two primary activities:

1. Power Generation (81% of FY24 revenue) – Burning lignite and coal across its five Neyveli-based and one Barsingsar-based plants (3,640 MW total), plus a 1,000 MW coal-based Tuticorin project via its subsidiary NLC Tamil Nadu Power Ltd. Add to that 1,380 MW of solar and 51 MW of wind. That’s right — NLC is India’s first CPSE to cross 1 GW in solar power. Congrats, you old fossil!
2. Mining (19% of FY24 revenue) – Three lignite mines (30.1 MTPA total capacity) and one coal mine in Odisha (20 MTPA). They dig it up, sell some, burn some, and keep the lights on — literally.

Now here’s where it gets juicy. The company plans to increase mining capacity to 41.35 MTPA for lignite, 62 MTPA for coal, and — wait for it — 1 MTPA for “critical minerals” by FY30. Translation: “We want to mine everything that glitters and conduct an annual fossil fuel family reunion.”

And just when you think this PSU can’t diversify further, it’s also experimenting with Lignite to Methanol, Overburden to M-Sand, EV charging, and even Green Hydrogen. The only thing left is to mine Bitcoin.

4. Financials Overview

EBITDA margin bounced back to a healthy 34%, like a PSU discovering yoga after years of lethargy. But PAT tumbled thanks to higher depreciation, finance costs, and maybe divine punishment for calling itself “green” while mining coal.

Annualised EPS now sits at ₹19.2 — giving a P/E of 13.1x, which, for a PSU, is like saying “cheap but dependable.”

5. Valuation Discussion – Fair Value Range Only

Let’s calculate a quick sanity range using three approaches:

(a) P/E Method:
Industry average P/E = 30.6x (lol, thanks Adani Green).
NLC trades at 13.4x.
Assume fair range = 12x to 18x based on PSU risk.
EPS (annualised) = ₹19.2
→ Fair Value Range = ₹230 – ₹345

(b) EV/EBITDA Method:
EV = ₹57,045 Cr
EBITDA (FY25 TTM) = ₹4,231 Cr
→ EV/EBITDA = 13.4x / 8.7x currently.
Peers (NTPC ~7.5x, JSW Energy ~15x)
So Fair Range = ₹250 – ₹360

(c) DCF (10% discount rate, 5% growth):
Projected FCF (avg ₹3,000 Cr/year for 5 yrs) → PV ≈ ₹11,400 Cr
Add terminal value ≈ ₹25,000 Cr → Total ₹36,400 Cr / 139 Cr shares = ₹262/share

✅ Educational Fair Value Range: ₹230 – ₹345