The mines are allowed to run till March 31, 2015, up until the government readies the framework for auction. Moreover, the companies will have to pay penalty at Rs 295 per tonne for all the coal mined to that date.
Discussing the verdict, Madhu Terdal, Group CFO, GMR Infra , which has also seen cancellation of few mines, said the company would not get impacted by the SC order. He said the company would have taken another 5 years to extract coal from Rampia mines in Odisha, allotted to it.
Moreover, the company has already been given a tapering coal linkage for plants for the next five years till 2020. He says the company may look at bidding for coal blocks once the government starts re-auctioning process.
Prasad Baji, Senior VP, Institutional Equities - Research at Edelweiss Financial Services, says companies like Prakash Industries and Monnet Ispat may also get hit by the SC verdict.
Edelweiss has a target price of Rs 360 per share on Coal India , which does not include the benefits of new coal blocks. He feels opening up of coal sector to merchant miners is a long-term goal.
Below is the transcript of Madhu Terdal and Prasad Baji's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Sonia: Tell us about the impact that the Supreme Court ruling would have on GMR Infrastructure because two or three of your mines have been cancelled. What is the kind of damage that you see and how much would you have to pay to regain these blocks in the auction process, if there is any ballpark estimate on numbers that you have been working on?
Terdal: First of all let me clarify that GMR is not at all impacted by this order. There were certain coal blocks which were allotted to some of the operators have been cancelled. GMR got allotted a mine called Rampia in Odisha and that coal mine was given to six people jointly, along with us it was given to Arcelor-Mittal, Reliance, Lanco and others. All these people had different strategic plans, for example Arcelor-Mittal cancelled their plans for India and they did not use the coal mines.
Therefore, in our view we would have taken another five years minimum to expect coal from this coal mines and looking at the way land acquisition policies are there, the difficulties in the state of Odisha, I think it is better handled by the Government of India rather than private company like ours. So we are not impacted by the cancellation of coal blocks and indeed instead of that we have already been given a tapering coal linkage for the next five year – that is till 2020, already the problem in the coal mine was anticipated and government has already given us a tapering coal linkage for 2020.
Latha: When will you next need coal and have you got all the coal through FSA for that period?
Terdal: Yes we have been given full coal. We are getting from the current coal mines which are given to us by Coal India. We have got a firm coal linkage for 500 megawatt; that is already in operation. For the balance of 550 megawatt we have been already given a tapering coal linkage. Wherever there is a shortfall we can import the coal from our own coal mines. So, that also is possible for us.
Latha: Will you therefore bid when the existing 46 guys are put on the block?
Terdal: We haven't thought of that as a group. I will not be able to comment on that.
Latha: At least yes or no, not whether you will outbid the existing guys or anything but you would be interested because these are well prospected and running mines?
Terdal: I think it makes sense without talking from the company's angle. I think it makes sense for us definitely to go for bidding.
GMR Infra stock price
On September 25, 2014, at 11:09 hrs GMR Infrastructure was quoting at Rs 19.00, down Rs 0.5, or 2.56 percent. The 52-week high of the share was Rs 38.30 and the 52-week low was Rs 18.70.
The company's trailing 12-month (TTM) EPS was at Rs 0.21 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 90.48. The latest book value of the company is Rs 16.76 per share. At current value, the price-to-book value of the company is 1.13.
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