The Digger-Turned-Power-Plant That Prints Dividends

Mining Dinosaur Bones, Burning Them For Power, And Somehow Still Making Money

Meet NLC India. A Navratna company owned 72% by the President of India (i.e., the Government of India). A company that digs up lignite — the lowest-grade coal known to thermodynamic civilisation — in Tamil Nadu and Rajasthan, burns it in thermal power plants, and then sells the electricity to state governments at tariffs set by bureaucrats. Pure genius, really.

But here’s the thing. The company reported ₹15,322 crore in FY25 revenue and ₹2,714 crore in PAT. That’s a 16% PAT margin on government-regulated tariffs. It owns captive mines (30.1 MTPA of lignite, 20 MTPA of coal via the Talabira block). It just acquired the Pachwara South coal block and is 51% owner of the new Neyveli Uttar Pradesh Power Limited (NUPPL), which is building 3×660-MW thermal capacity. It’s also the first CPSE to cross 1 GW capacity in solar power — now running 1,730 MW of renewables. And it maintains a 72.2% government shareholding, which is market-speak for “we’re not going anywhere and we can access capital at will.”

The challenge? Plant availability is poor. PAF (Plant Availability Factor) was 68% in FY25 — below the 70% normative level set by regulators. The new UP power project had cost overruns. The receivables from state discoms are perpetually late (though improving). And the return on equity is just 14.5%, which means for every ₹100 the government has sunk into this company, it earns ₹14.50 annually. Not embarrassing. Not exceptional either.

But the dividend yield is 1.47%, the stock has delivered 46% returns over 3 years, and the company just signed MOUs with NALCO for 1,200 MW of joint projects and with PTC for 2,000 MW of renewables. In a world where thermal power plants are facing existential EV-induced oblivion, NLC is quietly diversifying. Let’s dig into the numbers.

Dig. Burn. Sell. Repeat. Add Renewables. Repeat.

NLC India runs a vertically integrated lignite-and-power ecosystem, which is fancy speak for “we control the supply chain end-to-end.” Lignite mining is 19% of FY24 revenue. Thermal power generation is 81%. The company operates 5 lignite-based thermal plants (4 in Tamil Nadu, 1 in Rajasthan), 1 coal-based thermal plant (1,000 MW in Tuticorin, Tamil Nadu, via subsidiary NLC Tamilnadu Power Limited), and 1,730 MW of solar + 51 MW of wind (renewables).

Revenue model: The company mines lignite at cost-plus principles set by CERC (Central Electricity Regulatory Commission). It uses this lignite in its own thermal plants. The power generated is sold to state distribution utilities (discoms) at tariffs also set by CERC under cost-plus regulations with a regulated 15.5% return on equity. Translation: No pricing power. No demand risk. All revenue and profit flow from regulatory decree. Very stable. Very boring. Very dependent on whether regulators actually allow tariff recovery.

Capacity expansion is aggressive. By FY30, the company targets 10,020 MW of thermal (from current 4,640 MW), 41.35 MTPA of lignite mining (from 30.1 MTPA), 62 MTPA of coal mining (targeting the Talabira and Pachwara blocks), and over 10 GW of renewable capacity. The capital expenditure commitment is ₹113,631 crore over FY25–FY30. That’s nearly ₹19,000 crore per year, funded through a mix of operating cash flows, borrowings, and government equity support.

Q3 FY26: The Numbers That Actually Happened

Result type: Quarterly Results  |  Q3 FY26 EPS: ₹4.80  |  Annualised EPS (Q3×4): ₹19.20  |  Full-year FY25 EPS: ₹18.90

Key observation: Q3 FY26 PAT was flat YoY (₹724 Cr), but operating profit jumped 29.9% YoY. This means other income and tax rates are offsetting opex improvements. The underlying business is generating stronger operating cash, but PBT is being squeezed by one-time charges. This is typical of PSU results — noise overlays signal.

What’s This Government-Backed Thermal Beast Actually Worth?