Shares of metal companies were under pressure with the Nifty Metal index down nearly 3 per cent on the National Stock Exchange (NSE) in Wednesday’s intra-day trade after the Supreme Court (SC) permitted the state governments to impose taxes on mining and related activities retrospectively.
Hindustan Zinc (HZL), NMDC, Tata Steel, Vedanta, Hindustan Copper, Welspun Corp, Steel Authority of India (SAIL) and JSW Steel were down between 1 per cent and 6 per cent on the NSE.
A nine-judge Bench of the Supreme Court on Wednesday (August 14) ruled that its July 25 decision, which allows state governments to impose taxes on mining and related activities, will be applied retrospectively, but only for transactions occurring after April 1, 2005, according to a report by the Bar and Bench.
Shares of Tata Steel declined 4 per cent to Rs 142.35 on the NSE in intra-day trade. Thus far in the month of August, in 10 trading days, the stock has shed 14 per cent.
Tata Steel is currently engaged in a legal battle with Odisha over its law, which gives it the power to levy taxes on mineral-bearing land with effect from 1 February 2005. Tata has disclosed an accumulated contingent liability of ~Rs 17,300 crore related to this matter as on Q1FY25, Elara Capital said in its result update. The brokerage firm believes if the ruling is applied retrospectively, it would be a setback for Tata Steel, as the amount equates to ~Rs 14/share, or ~8 per cent of its market capitalization.
However, analysts believe the negative impact of weak steel prices on Tata’s near-term performance will be partly offset by lower coal and iron ore prices. Further, improved performance of Netherlands operations, expectations of recovery in the UK operations post closure of the second blast furnace by September and volume ramp-up from the new plant at Kalinganagar, Odisha, augur well for future performance. Therefore, we upgrade to Accumulate from Reduce, the brokerage firm said.
First Published: Aug 14 2024 | 12:59 PM IST
