Shares of Coal India, NTPC and Anil Ambani-controlled Reliance Power climbed sharply after the Supreme Court ordered de-allocation of all coal blocks except four. However, it was a black day for banking stocks, especially public sector ones, which have huge exposure towards the power and metal space. They lost between 2 per cent and 5.6 per cent.
The stock of Coal India rose 5 per cent to ₹351.35 on the BSE. Kishor P Ostwal, CMD, CNI Research, said the move is a huge positive for Coal India, which has the upside potential of ₹30-40 a share from current level, as the companies, whose coal licences were cancelled, will have to buy the key raw material from Coal India at market price.
It was a rough day for metal/mining and power stocks, as the apex court ordered them to compensate the Government at the rate of ₹295 per tonne for coal extracted.
Jindal Steel and Power was the worst hit among the metal pack. The stock hit a low of ₹180 during the day, before closing 10 per cent down at ₹189.50.
The losers included Hindalco Industries, MMTC, Tata Steel, Jayaswal Neco Industries, Visa Steel, Prakash Industries, Usha Martin, Bhushan Steel and Sarda Energy & Minerals.
Led by GVK Power and Infrastructure, which crashed 11.5 per cent, power stocks such as Monnet Ispat and Energy, Jaiprakash Energy Ventures and Adani Power too witnessed huge selling pressure amid volatility.
According to analysts, the PSU banks will be the most affected due to their large exposure to mid-cap companies in the steel and power sectors. Power Finance Corporation and Rural Electrification Corporation will be impacted due to their exposure to power utilities.
Reacting to the Supreme Court order, independent brokerage and investment group CLSA in a note said, “This outcome is more negative than we expected as the Court has gone beyond the coal block allocations investigated by India’s Comptroller & Auditor General (CAG), and has said that all coal mines allocated post-1993 are illegal, including several operational mines.”
CLSA analysts Abhijeet Naik and Nitij Mangal said JSPL would be hit hardest by this ruling. “The current producing coal blocks of JSPL were allocated to the company in 1996 and 1998 and any de-allocation of the same will hurt profitability of JSPL’s existing steel and power businesses,” they said.
“Tata Steel, JSW Steel and Sesa Sterlite are least impacted by this development and we would recommend buying these names if the sector sell-off intensifies further,” they added.