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JSPL worst hit; see least impact on Tata Steel: P Lilladher

Brokerage house Prabhudas Lilladhar expects coal blocks to be cancelled followed by auctions.

The News International Team

Supreme Court’s verdict that 218 coal blocks allocated since 1993 to 2009 are illegal and unconstitutional has sent ripples across the mining sector with stocks like Jindal Steel and Power ,  Hindalco and  Tata Steel taking a beating. 

No clarity has been provided on deallocation of this coal mines hence there concerns cancellation of these blocks could be a possibility. The apex court would hear the consequences of illegality of coal blocks September 1, 2014.

Brokerage house Prabhudas Lilladhar belongs to the camp which expects coal blocks to be cancelled followed by auctions.

Also Read: Neutral on metals, shun JSPL; like cement, energy, says Religare

“Our interaction with legal fraternity suggests that coal blocks would eventually be cancelled given the definition provided by the Court. Simultaneously, the Court would direct the Govt to organise the auctions for these blocks in time bound manner. Operational coal blocks would be allowed to operate by the existing allocatees till the auction takes place, the report says.

On stock specific impact, Naveen Jindal promoted Jindal Steel and Power (JSPL) would be worst hit because its entire 12 million tonne of production come from mines allocated after 1993. Further, it will delay the process of securing mining rights for its much awaited Utkal B-1 mine, critical for its Angul steel cum power project, it adds.

Second in line would be Hindalco as its Talabira-I mine, which was allocated in 1994, supplies 2.5MTPA of coal to meet one-third of its coal requirement.

However, Tata Steel, SAIL and  JSW Steel will be least impacted. “Our earnings estimates as well as valuations for Tata, SAIL and JSTL had not factored any contribution from any of their coal blocks given the slow pace of their clearances,” it adds.

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