* Stock jumps as much as 8 pct to 401.40 rupees
* PM-elect Modi explores spin-off of Coal India units
* Coal India investor says reforms imminent (Adds shareholder comments, details)
By Krishna N Das and Himank Sharma
NEW DELHI/MUMBAI, May 22 (Reuters) - Coal India Ltd shares jumped to a near three-year high on Thursday after Reuters reported that prime minister-designate Narendra Modi was exploring an overhaul of the state behemoth, a step that an investor said would unlock more value in the firm.
One of Modi's key election planks was to step-up supply of power, more than half of which is generated by coal. But red tape, protests against land acquisition and delays in obtaining environmental approvals have kept output far below demand.
India is the world's third-largest coal importer even though it sits on the fifth-largest reserves. Coal India produces more than 80 percent of India's total but often fails to meet output targets.
Modi may consider converting Coal India's various units into independent entities and make respective state governments equity holders to help speed up land acquisition and other such processes, sources say. Bringing in foreign investors and auctioning coal blocks could also be explored.
"Coal India is effectively one of the best ways to play the whole reform in India, because that is a clear priority for Mr Modi," said Oscar Veldhuijzen, partner at The Children's Investment Fund Management (TCI), which owns shares in the company.
The London-based activist hedge fund, which in 2012 was the largest public shareholder in Coal India, has since cut its stake because of what Veldhuijzen called the company's refusal to listen to its suggestions.
TCI had asked the company to accelerate setting up washeries that would improve coal quality and fetch higher prices, as well as consider share buybacks. The fund took the company to court in 2012 over its decision to reverse a price hike on the orders of the federal government.
Veldhuijzen declined to give more details on TCI's current investment in the company.
Modi's thumping general election victory and the imminent resignation of Coal India chairman S. Narsing Rao should help speed up reforms, Veldhuijzen told Reuters by phone from London. Rao told Reuters he may quit this weekend to work for the government of a newly created state.
"Coal India has a number of subsidiaries and a breakup may give each of them higher autonomy," said Atul Kumar, equity fund manager at Quantum AMC in Mumbai. "The main objective is to increase output of coal for India."
Coal India stock was among the top gainers on India's NSE index, rising as much as 8.22 percent in early trade to 401.40 rupees, the highest since August 2011. The stock has gained over 37 percent in the two weeks since voting in India's five week long election concluded.
"There's a lot of interesting dynamics, probably a little bit too early to make a final call on it," Veldhuijzen said. "But as this company is one of the greatest beneficiaries of Modi winning the elections, I suspect the stock would continue to rally." (Additional reporting by Abhishek Vishnoi; Editing by Tony Munroe and Mark Potter)