Effects of Supreme Court’s judgement on #Vedanta group companies


6 DEC, 2012, 04.27PM IST, GAURAV MODI,ET BUREAU

MUMBAI: Supreme Court’s verdict on Niyamgiri mines today and on Goa mining tomorrow will decide the stock price movement of Sterlite IndustriesBSE 2.35 %and Sesa GoaBSE 1.61 % on the bourses in the short term. However, few positives have already been factored in the market in last 10 trading sessions.Mining of bauxite ores from Niyamgiri mines has been banned by the Supreme Court to protect the tribes from the Odisha hills. The probability of the decision to be favour of the company seems to be bleak. Shutdown of the alumina refinery in Lanjigarh reaffirms the fact that the company itself is not optimistic. However, analysts from the streets believe that in case the decision comes in favour of the company, the stock price of Sterlite Industries can see an up move of around 30% in the short term and another 30-40% in the long term.

The Supreme Court will also come out with a decision tomorrow on the petition filed by the Goa government to resume mining activities. There are three distinct possibilities in this case.

The verdict allows resumption of mining activities- SC’s strictness on matters related to environment and illegal mining (as was also seen in the Karnataka mining ban) makes this scenario least possible. However, it may so happen that the court allows partial mining as the sector contributes nearly 35% to the GDP of the state and provides huge employment. In this case, analysts believe that the fair value of the stock should be in the range of Rs 190-200.

The verdict only allows transportation of already mined inventory- it is believed that this looks like the most plausible case and will help Sesa Goa release roughly 2.5 million tonnes of iron ore it has in inventory. This case will however not be a big boost to the company as it is believed that the fair value in this case is Rs 165-Rs170.

The verdict uphelds the ban- Since Sesa Goa has 15.5 million tonnes of capacity in Goa out of the total 18.4 million tonnes, this scenario will have a severe impact on the company. The company has not been mining anything since the ban was put. The fair value in this scenario is expected to be around Rs 150-155.

The stock prices of both the group companies have become highly correlated amid the news of potential merger by year end. The prices of both the companies have gone up by 15-20% in the last 10 trading sessions. The conditional nod for the residual stake sale in Hindustan ZincBSE 0.22 % and BALCO by the Ministry of Corporate Affairs last week has also helped the stocks to show a one way run up.

The SC’s decisions today (on Sterlite) and tomorrow (on Sesa Goa) will determine the future changes in the prices of the two companies in the short to medium term

 

7 Comments (+add yours?)

  1. MI
    Dec 07, 2012 @ 09:02:51

    Reblogged this on Murali.

    Reply

  2. Trackback: Effects of Supreme Court’s judgement on #Vedanta group companies « cognitionaman
  3. Trackback: #Vedanta ropes in IBM to enable strong business growth « kracktivist
  4. Trackback: Call for action: Kick #Vedanta out of London for it’s corporate crimes, murder and destruction. « kracktivist
  5. Trackback: Govt drops land acquisition plan for #Vedanta steel project #goodnews « kracktivist
  6. Trackback: #India-Mining Ministry’s Zero Loss Theory « kracktivist
  7. Trackback: Indian Govt’s sell off plan may hit Vedanta « kracktivist

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