Shares of Steel Authority of India Ltd., Hindustan Zinc Ltd. and other mining stocks had a mixed market sentiment on Friday after the Supreme Court of India directed the government to reconsider the current methodology for calculating mining royalties.
The Court cited concerns over the "compounding" effect of the existing rules. The decision could provide relief to mining companies that have been facing an excessive financial burden due to the current system.
The judgment is expected to benefit major players in the sector such as Tata Steel Ltd., JSW Steel Ltd., Hindustan Zinc, and SAIL.
Under the current royalty calculation method, mining companies are required to pay royalty not only on the mineral extracted but also on the royalties paid in the previous months, effectively creating a "royalty on royalty" scenario.
This has led to a cascading effect, increasing the overall financial burden on mining leaseholders and impacting their profitability. It was estimated that the current royalty structure could reduce the Ebitda of these companies by 2-3%.
The potential revision of the royalty calculation could have a positive financial impact on mining companies. However, the Court has given the government to months to take a final call in this regards.
SAIL's share price fell 5% to Rs 117.20 apiece, as of 9:18 a.m. While, MOIL stock also posted a loss of 1.74% to touch Rs 332.30 apiece.
Coal India shares were trading 1.11% lower at Rs 430.50 apiece, while GMDC was down 1.07% at Rs 364.55 apiece and Ashapura Mines shares also were trading around 1.06% lower at Rs 255.98 apiece.
NALCO shares traded 2.82% higher at Rs 245.35 apiece as of 9:22 a.m., while NMDC and Vedanta also posted an increase of 1.45% and 1%, respectively. Hindalco was trading 0.92% higher, and Hindustan Zinc was trading 0.45% higher.
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