Top 3 Undervalued Stocks with High ROE

#1 Coal India

First on the list is the stock of Coal India.

Coal India holds a near monopoly position in Coal mining and production sector. It commands over 80% of the country's coal production, making it the largest coal producer in the world.

The stock of Coal India has often been accumulated by investors for an attractive dividend yield. The shares trade at a price to earnings ratio of just 9.1 times, with a solid ROE of 35.6%.

Moving ahead, Coal India's roadmap targets 1.23 bn tonnes by FY 2035, with an 8% annual growth forecast from FY 2025. The company has secured priority access to railway infrastructure and are expediting project clearances for FMC implementation.

The diversification into coal gas, coal bed methane (CBM), and renewable energy aligns with emerging policy incentives and opens up new revenue avenues.

At the same time, the company is now exploring joint ventures for coking coal washeries to strengthen domestic options for steel manufacturers.

Coal India has commenced a series of structural, operational and digital interventions to improve productivity, reduce environmental impact and diversify revenue sources.

These efforts focus on improving loading infrastructure, digital mine management, coal quality and internal process efficiency, while supporting long-term goals in renewable energy, gasification, and carbon reduction.

#2 NMDC

Next on our list is NMDC Limited.

The company is India's largest iron ore producer and a Government of India enterprise under the Ministry of Steel. It plays a critical role in supplying raw material to India's steel industry.

The mining company has a strong ROE of 22%, and like Coal India is known for its dividend yield. The price book value of the company is also reasonable at 2 times.

Moving ahead, NMDC plans to double its production to 100 million tonne per year by 2030, up from 45 million tonne in 2023-24 (Apr-Mar).

Expansion involves big infrastructure projects, slurry pipelines, beneficiation and pellet plants -aimed at more efficient extraction and transport.

Through its subsidiary (NMDC Steel), it now runs the Nagarnar steel plant.

The company is evaluating mining opportunities abroad (coking coal, lithium, copper, etc.), which could diversify revenues and reduce reliance on iron ore alone.

NMDC's future is centered on a major capacity ramp-up and diversification.

If it successfully executes its expansion plans and leverages India's growing steel sector, it could significantly increase production, revenues, and market influence by 2030.

#3 Bank of Maharashtra

Next on our list is Bank of Maharashtra.

The bank was Established in 1935, and has grown from a regional lender focused on small businesses into one of India's significant public sector banks with a nationwide presence.

Bank of Maharashtra has a strong ROE of 19.3%. The Bank has a strong capital adequacy ratio of 20.5%.

With a Net NPA of 0.15% (as of Q3 FY2026), it has one of the cleanest balance sheets in the Indian banking sector. This allows the bank to focus on expansion rather than debt recovery.

The bank has done well in Q3 FY26, beating earlier guidance. The total business for the period was up 17.24%, as against the bank's guidance of 15% growth year-on-year.

Bank of Maharashtra is actively expanding its footprint in key growth regions across the country. As part of its five-year strategy, the bank aims to establish 1,000 new branches within this period.

For FY26, the bank has launched an ambitious initiative titled Project 321, under which it plans to open 321 branches within the next 18 months.

The bank is placing significant focus on Retail, Agriculture, and MSME (RAM) lending, which collectively account for over 62% of its domestic credit portfolio.

Overall, with key metrics improving over the last few years, the bank is positioned well to be a part of India's growth story.

Should You Consider Undervalued Stocks with high ROE?

Investing in undervalued stocks with high Return on Equity is a sophisticated strategy that targets efficient companies trading at a discount.

However, the primary risk involves determining whether the high ROE is a result of operational excellence.

A company can artificially boost its ROE by taking on excessive debt. Ultimately, an undervalued stock with a high ROE is only a bargain if the company possesses a durable competitive advantage that prevents its margins from eroding. I

If the low valuation is caused by a permanent decline in the industry or a fundamental shift in consumer behavior, the high ROE may be a lagging indicator that will soon collapse. Success with this approach requires looking past the surface metrics to ensure you are buying a productive asset rather than a value trap.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...