JSW group firms lose Rs 4,800 cr in 3 days

Market cap hit on selling pressure after Lokayukta report, SC mining ban in Bellary.

Shares of Sajjan Jindal-led JSW group companies continued their slump on bourses, taking their combined loss of market capitalisation to about Rs 4,819 crore in three sessions, after the Karnataka Lokayukta indicted JSW Steel in its report and the Supreme Court banned mining in Bellary.

On Monday, JSW Steel scrip declined 10.26 per cent to Rs 694.80, on the Bombay Stock Exchange (BSE), while Jindal South West Holdings tumbled 13.71 per cent to Rs 745.40. JSW Energy shares fell 2.66 per cent to Rs 65.75. After this fall, the promoter group’s wealth has been eroded by about Rs 2,193 crore in the last three sessions, data compiled by BS Research Bureau show.

Citigroup analysts downgraded JSW Steel stock to “sell” and more than halved their price target to Rs 612 from Rs 1,254 earlier. “The blanket ban on iron ore mining in Bellary, imposed by the Supreme Court, is likely to impact costs/volumes, as Bellary accounts for most of JSW Steel’s ore and the ban could be extended in other areas of Karnataka. Given its high debt levels, JSW Steel is highly leveraged to small changes in volumes and/or costs,” they said in a note to clients.

Another analyst with a domestic brokerage said: “The mining ban is very critical for the company, as it will have to bring down its production due to the non-availability of the raw material. More, the company recently commissioned its 3.2-million-tonne blast furnace, which was being ramped up, to reach full capacity. Now, because of the uncertainty, the company will definitely delay the ramping up of the capacity.”

The final report on illegal mining in Karnataka, give on June 28, said JSW Steel and its suppliers had caused a loss of close to Rs 325 crore to the state exchequer between April 2009 and July 2010.

On June 29, JSW Steel had clarified that all transactions had been done in a legally-compliant manner and it would suitably respond at an appropriate time to the authorities concerned as might be required, after examining the report in detail. In contrast, Gautam Adani-promoted Adani Enterprises, which was also indicted in the Lokayukta report, recouped some of its losses after it clarified that it never had any mining interest in iron ore anywhere in India and the alleged illegal gratification could not be attributed to the company, as it had been a mere port operator.

“Adani Enterprises is only one of the four port operators providing services at Belekery. We pay port charges to the government and render services related to storage and handling of cargo. All the responsibility of approvals relating to mine permits and transportation lie with the miner and/or exporter,” an official statement from Adani Group CFO Devang Desai said.

Adani Enterprises’ stock rose 8.82 per cent to Rs 637.80 on BSE. Stocks of other Adani Group companies Adani Power gained 4 per cent to Rs 103.25 and Mundra Port & SEZ 0.97 per cent to Rs 145.20. The three stocks have collectively lost market capitalisation of Rs 18,508.76 crore in the last three sessions, making its promoters poorer by Rs 14,373 crore. Shares of NMDC, which also figured in the Lokayukta report, gained 2.27 per cent to Rs 245.60 on Monday on BSE. Sesa Goa shares, which had come under pressure after the apex court banned mining in Bellary, fell 2.20 per cent to Rs 268.95 on Monday.

(With inputs from Ashok Divase)