Can CMPDIL IPO deliver long-term gains for high risk investors?

Synopsis

Central Mine Planning & Design Institute (CMPDIL), a Miniratna PSU, plans to raise ₹1,842 crore through an offer for sale. The company has shown strong financial growth, driven by steady coal demand and expanding exploration opportunities. However, revenue concentration from government entities and potential policy shifts towards green energy present risks.

ET Intelligence Group: Central Mine Planning & Design Institute (CMPDIL), a Miniratna PSU and country's largest coal and mineral consultancy, plans to raise '1,842 crore through an offer for sale. The promoter shareholding will decline to 85% from 100% after the IPO.

The company has posted consistently strong financial growth over the past three years. Steady coal-based power demand and expanding exploration opportunities in non-coal and critical minerals offer long-term growth visibility to the company.

However, it earns over two-third of revenue from government entities, which poses concentration risk. Also, any policy shift favouring green energy poses a significant long-term risk to the company's business. Given these factors, the issue is suitable for long-term retail investors with a higher risk tolerance.

Business

Incorporated in 1975, Central Mine Planning & Design Institute is a wholly owned subsidiary of Coal India and provides services across geological exploration, resource evaluation, mine planning and design, environmental engineering, geomatics, specialised technical studies, and management systems. Geological exploration and resource evaluation is the largest division contributing 46.2% to revenue followed by mine planning and design with 21.2% share, environmental management services (17.1%), and geomatics and survey services (15.5%) in FY25.

The company held a 61% market share in FY25. Coal India was its biggest client contributing 66% to revenue in FY25.

The company plans to diversify into consultancy for non-coal minerals such as lithium, copper, nickel, cobalt, bauxite and iron ore. It is also exploring international opportunities across Africa, South America and Australia, while strengthening capabilities in clean-energy-linked services such as coal bed methane, underground coal gasification and renewable integrations.

Agencies

play Long Coal and mineral consultancy has performed well, but is dependent govt entities

Financial

Revenue increased 23% annually between FY23 and FY25 to '2,102.7 crore. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) rose 48% annually to '840.9 crore while net profit more than doubled to '666.9 crore by similar comparison. Ebitda margin improved to 40% in FY25 from 27.6% in FY23. The company has a higher margin compared with 17-24% for peers.

CMPDIL's return on equity rose to 37% in FY25 from 27% in FY23, higher than the 16-24% peer range. As a PSU, the company follows government's guidelines of paying an annual dividend of at least 30% of net profit or 5% of net worth, whichever is higher. The dividend payout ratio was 45% in FY25 up from 32% in FY23.

Valuation
The issue is valued at a trailing price-earnings (P/E) multiple of 18 based on post-IPO equity. Considering annualised profit for FY26, CMPDIL's P/E is 21.6 compared with 16.5 and 26.4 for Engineers India and RITES.

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