MARKET OVERVIEW :

Blow For Mining Companies in India

Tata Steel, NMDC shares sell-off as retrospective tax /royalty worries return.

Shares of Tata Steel, MOIL, NMDC are seeing selling pressure to the tune of 3% to 4% post the Supreme Court judgment.

Shares of Tata Steel Ltd., MOIL Ltd., and NMDC Ltd. faced selling pressure on Wednesday after the Supreme Court verdict on the ability of states to levy tax and royalty on minerals.

Thank you for reading this post, don't forget to subscribe!

A bench led by Chief Justice DY Chandrachud allowed states to collect past dues in the form of royalty and tax from April 2005. The Chief Justice said that the time for payment of demand for tax shall be staggered in installments over a period of 12 years, starting April 1, 2026.

The court rejected the Mineral Area Development Authority’s request for prospective realisation of levy by states.

Shares of Tata Steel appear to be the worst hit as the stock has declined to the lowest point of the day with losses of over 3.6%.

Tata Steel had highlighted during its quarterly results that it has provisioned ₹17,300 crore as contingent liability against claims by the state of Odisha, if they are applied retrospectively.

In a post-earnings interaction with CNBC-TV18, the management of Hindalco said that they will not have any impact if the claims are implemented retrospectively as they currently have no pending claims.

“According to my knowledge, there are three states who had levied this kind of cess earlier. One is Odisha where Tata Steel mines are. The other is Jharkhand, and the third one is probably Tamil Nadu, because this whole thing emerged from a case which India Cement had against the government of Tamil Nadu, where Tamil Nadu government had put some cess on limestone mining. So, I think all the companies who have mining assets in these three states are going to be hit quite badly by this retrospective tax, which Supreme Court has allowed. The saving grace is that they have to pay it in a staggered manner. So, it’s not like one payment, which can cripple the company at one go, but it’s a direct impact to their net asset value (NAVs),”

However, Hindustan Zinc’s management is optimistic that the government may take a lenient view on this when it comes to PSUs.

“PSU companies, state government can take a lenient view, like what we saw in case of NALCO, they waived off the extra royalty on their bauxite mining. So, there is a chance that PSUs might get spared, but that is just a hope that we have right now. I think what the market is missing is probably the cement companies, and especially the one in Tamil Nadu, that can have a big hit,” Arun Misra, Hindustan Zinc’s CEO and Whole-time director told CNBC-TV18.

Shares of Tata Steel are trading 3.1% lower at ₹144.23, while those of NMDC are trading 3.8% lower at ₹215.91. MOIL shares are also down 3.4% at ₹409.25, whereas those of GMDC have corrected significantly from the highs of the day, currently trading 1.2% lower at ₹358.