Coal blocks de-allocation may have an adverse impact on the domestic coal supplies in the country and will also erode investor confidence
As soon as the Supreme Court ordered cancellation of 214 coal blocks out of the total 218 reserves given away by the government between 1993 and 2010, shares of Jindal Steel and Power limited, Monnet Ispat, Tata Steel and Hindalco came down sharply.
These are among the significant entities whose blocks have been cancelled by the apex court. Shares of JSPl plummeted by around 15 per cent during the trading session, but finally closed at Rs189.70 down by 10 per cent. Shares of Monnet Ispat, Tata Steel and Hindalco also dropped by 6.58 per cent, 2.63 per cent and 0.48 per cent respectively.
Markets experts believe that the decision by the apex court on coal blocks de-allocation is likely to have an adverse impact on the domestic coal supplies in the country and will also erode investor confidence.
On the other hand it has been a big positive for Reliance Power (Moher & Moher Amlori Extension), SAIl (Tasra block) and NTPC (Pakri Barwadih) since these blocks allotted to them were spared by the apex court. This subsequently reflected in their share price as Reliance Power surged by more than 5 per cent and NTPC by around one per cent.
Although SAIl’s coal block was also spared from de-allocation, the market showed them the thumbs down. Shares of SAIl fell by 2.89 per cent and closed the day at Rs 68.95.
Ashutosh Bhardwaj, analyst at Nirmal Bang says, that the judgement will lead to serious supply disruptions as mining operation will be disrupted, which will further accentuate power crisis.
Shares of public sector lenders like Punjab National Bank and State Bank of India also took a beating given their large exposure to the sector. Shares of PNB and SBI fell by 4.28 per cent and 2.68 per cent respectively. The BSE Bankex index was down by 1.28 per cent.
Currently, about 40 blocks are producing coal to the tune of 53 million tonnes and accounts for 10% of the total coal supplied in the country.
The judgement was also positive for Coal India as in the long run it can take over the cancelled coal blocks and manage its affairs for continuing the mining process. The stock of CIl jumped by 5.02 per cent during the day and ended at Rs351.35.
Piyush Jain, analyst at Morningstart says, that because of the coal block cancellations, CIl will have an advantage in e-auction prices. So they will get some boost in the e-auction prices, although it constitutes quite a small percentage of the total volumes. But there will be some incremental profit there.