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Informist, Friday, Aug 16, 2024

MUMBAI - Shares of metal companies are likely to be rangebound next week due to uncertainty over the recent ruling by the Supreme Court allowing state governments to levy taxes on mineral rights retrospectively. Analysts are waiting for commentary from companies in the sector to fully understand the impact of the ruling on their financials.

"Although it (the Supreme Court decision) is a negative development, the market now realises that there is still news to come about how things will look going forward," a research analyst who covers the sector with a domestic brokerage firm said. The analyst said it is better to wait for more details on the development and "let the dust settle down".

In a note today, Kotak Institutional Equities said the SC ruling will have marginal impact on companies under its coverage. "The demand raised by states under different laws could be further litigated based on merits on a case-to-case basis. A few companies, for instance, Hindalco, have not received any demand whereas the disclosed contingent liability of a few, like TATA (Tata Steel), could include interest and penalties, which is not admissible," the brokerage said.

Kotak Institutional Equities expect states to raise taxes for companies in the sector after the ruling. "However, states would have to balance tax revenues against investment attractiveness and job-creation opportunities. Also, different taxes of mineral across different states also defeats the federal structural of India and the centre could potentially intervene, capping the taxes or rights of the states through amendment in the MMDRA (Mines and Minerals (Development and Regulation) Act)," the brokerage said.

State-owned miner NMDC today said it will pass on to customers the liability arising from retrospective imposition of royalties by state governments on minerals. Therefore, the company sees the royalties having negligible impact on its finances, according to the management's comments in a post-earnings conference call.

Amitava Mukherjee, chairman and managing director with additional charge at NMDC, said the company has a hard-to-recover liability of 210 mln rupees from Madhya Pradesh as many of its customers are out of business. However, liabilities of 1.4 bln rupees from Chhattisgarh and 26 bln rupees from Karnataka can be recovered from customers. Of this, royalty amounting to 17.5 bln rupees has already been collected from consumers and paid to the Karnataka government, Mukherjee said.

Shares of steel companies are likely to be muted due to weak prices of products as cheap imports are hurting domestic companies. "...likely seasonal weakness in domestic demand and ongoing cheap imports may exert further pressure on domestic prices," Elara Securities said in a note on Wednesday. The brokerage said the September quarter started on a weak note, in terms of product prices, with domestic hot-rolled coil steel prices down 3% on month in July.

TOP HEADLINES

* Order on states' power to tax minerals applies retrospectively - SC
* Promoter Vedanta to sell up to 51.44 mln shares of Hind Zinc
* Jindal Stainless commissions nickel smelter facility in Indonesia
* Tata Steel buys 1.16 bln shares of arm T Steel Holdings for $182 mln
* Vedanta raises Hindustan Zinc OFS to 140 mln shrs vs 110 mln earlier
* Hind Zinc board to mull second interim dividend for FY25 on Tue
* NMDC Steel net loss narrows on qtr to 5.47 bln rupees in Apr-Jun
* Ratnamani Metals Apr-Jun PAT falls 23% on year, sales fall 0.2%
* Vedanta to sell up to 110 mln shrs or 2.6% of Hindustan Zinc via OFS
* Hindalco consol PAT, revenue miss Street view, EBITDA up 31% on year
* Hindalco board inducts Ananya Birla, Aryaman Birla as directors
* JSW Steel arm to buy up to 66.67% stake in M Res NSW for $120 mln
* Hind Copper Apr-Jun PAT up over 2-fold YoY at 1.13 bln rupees
* NALCO Apr-Jun sales fall over 10% YoY, PAT surges 72%
* Usha Martin Apr-Jun consol PAT rises 3.4% on year to 1.04 bln rupees
* Hindustan Zinc says no decision on 60-bln-rupee special dividend

Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Anshul Choudhary
Edited by Ashish Shirke

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