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Sensex, Nifty flat; PFC, REC, SBI, Tata Power nosedive

11:00

The News International Team

11:59am Coal block allocation scam impact on power sector

The Supreme Court’s decision to pronounce the terms under which coal blocks were allocated post 1993 as illegal is unlikely to disrupt operations of power players at the moment, says Vinayak Chatterjee, chairman, Feedback Infrastructure.

According to Chatterjee, the SC ruling is only one more impetus to clean up the system. The apex court has been cautious enough in not deallocating coal blocks and will take the decision on September 1, he adds.

He urges investors not to trigger a panic reaction to the SC ruling.

P Pradeep Kumar, MD – Corporate Banking, at SBI adds to the discussion saying that the bank has around Rs 92,000 crore of exposure to the power sector and some of it is likely to get affected. However, agreeing with Chatterjee, he too believes market should not panic and wait for a final decision by the apex court until September 1.

11:25am JP Associates in focus

JP Associates continues with its plans to pare down debt. In its latest move, the company has sold its cement grinding unit in Panipat to Shree Cements for a consideration of Rs 360 crore at a valuation of USD 40 per tonne.

Rahul Kumar, CFO, Jaiprakash Associates says the value of the latest deal is not at all comparable with the value at which the other deal was done about six months back.

“There was the Bokaro joint venture because different plants, different locations have different markets and the profitability of each plant varies. Also, the Bokaro grinding unit also had two critical long-term raw material contracts. It had a 30-year clinker contract and a 30-year slag contract that added to the value of that deal and so, the deals are really not comparable,” he elaborated.

Kumar further says that the Panipat grinding unit capacity was an additional capacity over what the company actually required in its north zone to fully utilize the clinker from its clinkerisation plant in Himachal Pradesh.

So even after Panipat, the company had three grinding units, two in Himachal Pradesh and one in Uttarakhand.

11:00am The market remained rangebound ahead of August series expiry scheduled on Thursday. The Sensex rose 2.73 points to 26439.75 while the Nifty fell 3.50 points to 7902.80.

About 1060 shares have advanced, 1290 shares declined, and 107 shares are unchanged.
 
Public sector lenders declined on concerns of asset quality due to their exposure to the coal mines deemed illegal by the Supreme Court. Credit Suisse said State Bank of India (down 1 percent), Power Finance Corporation (down 4.7 percent) and Rural Electrification Corporation (down 3.65 percent) appear to have the highest exposure to these coal mines.

The Supreme Court on Monday held terms of allotment of coal blocks as illegal but stopped short of deallocating coal blocks. JSPL lost 4.7 percent.

Tata Power dropped 3 percent as SC stayed Aptel’s interim order on compensatory tariff, which allowed companies like Tata Power and Adani Power to charge higher tariffs from discoms on a prospective basis. Additionally the stock reacted negatively to the fuel and contractual uncertainty which has intensified for the power sector post the SC order on coal blocks.

However, Tata Steel gained 3 percent as its operational captive coal mines were allocated long before 1993. Morgan stanley believes the stock is more attractive after the unfair stock reaction it saw in previous session.

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