JSPL stock skids 6% as SC defers interim order in Sarda mines case

The Supreme Court (SC) on Tuesday refused to pass an interim order in the Sarda mines case, after which shares of Jindal Steel and Power (JSPL) fell 12 per cent intra-day before recovering a little.

JSPL shares ended the day 6 per cent lower than its previous close on the BSE at Rs 150 apiece. The Delhi-based firm has claimed Rs 2,000 crore worth of iron ore, but the SC has not allowed it to transport or sell it.

“The court has not given any decision on the Sarda case. It has only deferred the hearing to January 17. Deferral does not mean refusal at all,” said V R Sharma, managing director (MD), JSPL.

In a flash note, Edelweiss Securities said, “We do not rule out the delay in the final outcome since the judgment would take some more time. However, the stock reaction seems exaggerated.”

JSPL’s management said a SC-appointed committee had established the rights of the company over iron ore lying at Sarda mine site.

“The ore lying on the premises of the Sarda mines must be used by the user (JSPL) since the company has already paid the duties as well as the royalty to the government, the committee has said. We are awaiting the final verdict now, which will hopefully come next month,” said JSPL MD Sharma.

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The Odisha government and JSPL have been disputing the royalty payment for the iron ore for more than five years now. The 12 million tonne iron ore fines lying on the mine premises are of 65Fe (ferrous) grade. The mines are currently not operational. A favourable verdict would help the company get assured iron ore supply for its pellet plant.

Currently, it is sourcing raw material from the open market. The plant is at the bottom of the hill at the Thakurani deposit where Sarda operated a 5 million tonne mine. The ore at the mine was extracted over 18-21 months before operations were stopped because of environment clearance issues, said the company’s management.

JSPL’s lenders are also batting for it to get access to the coal quickly so that it can repay debt, said Edelweiss Securities’ flash note. The dispute began as JSPL wanted to transport the extracted ore from the mine while the Odisha government said it would also count as mining and could not be allowed.

“We have a positive operating outlook for JSPL in anticipation of sustained volume uptick and potential cost benefit from captive coal from the Gare Palma IV/1 block. We have not considered any benefit from Sarda iron ore fines inventory in our estimates,” said Edelweiss Securities said. It has maintained “buy” on the steel producer. In Odisha, JSPL has a 6 million tonne steel plant in Angul, a 9 million tonne pellet plant in Barbil and an iron ore mine in Tensa, which partially fulfills the requirement of iron ore for producing sponge iron.