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