Shares of major mining companies, including Tata Steel Ltd., MOIL Ltd., and NMDC Ltd fell up to 5% in early trade on Wednesday following a Supreme Court ruling related to state taxes and royalties on minerals.The court’s decision allowed states to collect past dues in the form of tax and royalty from April 2005. This ruling caused a notable drop in the stock prices of these mining companies.Shares of major mining companies, including Tata Steel Ltd., MOIL Ltd., and NMDC Ltd fell up to 5% in early trade on Wednesday following a Supreme Court ruling related to state taxes and royalties on minerals.The court’s decision allowed states to collect past dues in the form of tax and royalty from April 2005. This ruling caused a notable drop in the stock prices of these mining companies.This ruling was made during the delivery of a judgment by Chief Justice of India (CJI) DY Chandrachud, who was addressing whether the court’s July 25 ruling, which affirmed the states' authority to impose taxes on mineral rights and mineral-bearing land, would be applied retroactively or only prospectively.Among the affected stocks, Tata Steel was hit the hardest. Its shares fell by more than 3.6% to reach the lowest point of the day. Tata Steel had previously set aside Rs 17,300 crore as a potential liability for claims from the state of Odisha if these claims were made retroactively.Hindalco’s management stated in a post-earnings interaction with CNBC-TV18 that the company would not be impacted by the retrospective claims, as it does not have any pending claims from states.Tata Steel’s shares were down 3.1% at Rs 144.23. NMDC shares fell 4.45% to Rs 214.48 while MOIL’s shares decreased by 3.78% to Rs 407.75. GMDC also saw a decline, with its shares trading 1.03% lower at Rs 358.60 after earlier highs.The Supreme Court’s decision has clearly had a significant impact on these mining companies, leading to a broad sell-off in their shares.
NMDC is a government company. It has the status of 'Navratna'. It is the largest domestic iron ore mining company.
NMDC INVESMENT
12 out of 18 analysts are advising to buy this stock. At the same time, 4 say that it should be held.
The performance of the metal and mineral sector has been weak in the recent past. Despite this, NMDC has given good results. In 2018-19, the company's revenue growth was 5 percent and earning growth was 26 percent. The company's performance has also been excellent in the fourth quarter ended March this year. During this period, the company's total profit has increased by 31 percent.
NMDC is a government company. It has the status of 'Navratna'. It is the largest domestic iron ore mining company. It does iron ore mining at the lowest cost in the world. So far, its high growth has not had much impact on its shares. This means that it still has a lot of potential. At the same time, due to production constraints in the short term, this stock has declined.
While fast-growing companies are trading at very high prices, NMDC is still available at a PE of just 6.98. PE shows how many rupees you have to spend to earn one rupee.
First, the outlook for domestic iron ore demand is quite good. Global iron ore prices have jumped by 50 per cent since January due to supply constraints from Brazil. They have now reached a five-year high.
Although domestic iron ore prices have not increased on the lines of the international market in the short term, they are expected to increase in the medium term. Domestic iron ore prices will increase due to increase in domestic steel production, disruptions in domestic iron ore production, etc.
Second, there is a clear possibility of increase in NMDC's earnings. The reason is that the quality of its mines is very good. However, the market is focusing more on production-related issues in some of the company's mines.
This is due to the royalty dispute with the Karnataka government. NMDC's volume guidance for 2018-20 is only for 32 million tonnes. That is, the production of the Donimalai unit has not been taken into account.
Its capacity is 6 million tonnes. This means that the company is currently not looking at the possibility of starting production in this unit again. The Donimalai case is pending in the High Court. If the decision comes in the company's favor, it will give more life to its shares.
market is ignoring one of NMDC's major investments. Work is going on on its 3 million tonne per annum steel plant. This plant is expected to be operational in the second half of 2019-20.
The company has already spent about Rs 15,000 crore on this plant. Another capital expenditure of Rs 3,000 crore is to be made on this. Once this capital expenditure is completed, NMDC's cash flow will improve.
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