With the Supreme Court’s verdict in the coal allocation case drawing near, coal and power minister Piyush Goyal on Sunday said the government will comply with the Supreme Court's decision on the fate of the illegally allocated coal blocks without making a case for exemption for any player.
Harshvardhan Dole, VP Research - Institutional Equities, IIFL does not expect final judgment by the Supreme Court tomorrow as many companies are in the process of filing affidavits, as suggested by the Attorney General. However, he is confident of the final verdict being announced in a few weeks.
In addition, he says that IIFL will wait for the Supreme Court's final judgment before tweaking any estimates on companies.
Below is the verbatim transcript of the interview;
Q: What is your sense in terms of what we could hear on September 9 and have you tweaked your estimates on a couple of these stocks such as JSPL already?
A: Tomorrow, September 9, based on the discussions that we have had with the industry and few legal experts, the court may not pronounce the judgement tomorrow itself as a lot of these companies are in a process of filing affidavits as suggested by the Attorney General but the outcome will definitely come through in next couple of weeks time. At this juncture, one has to build various scenarios as to what will be the outcome, whether all the coal blocks will be deallocated or whether this will be part deallocation whether that will be auctioned out - there are various scenarios that one might have to build right now and till the time the final outcome is out, I have not tweaked in the earnings estimate for any of these companies.
Q: Two years ago, the CAG had mentioned the loss of 1.84 lakh crore to the country because of this cheaper coal being given, allocated coal. Now the Times of India report almost reiterates that in fact, it seems to give a higher loss figure for the country for just about less than a dozen power projects. What according to you is the estimable loss and are we going to see therefore a long period of shadows for coal allocation?
A: I am not in a position to quantify or even comment whether the estimates worked out by various agencies and especially the CAG whether that is incorrect or otherwise. All that I can say is over last few years, the cost of generation of power has certainly gone up and coal accounts are almost 17 percent of the total cost and unless the consumers are compared to pay the market price of power, I think the whole allocation process itself and the power generation thereon is going to suffer meaningfully. So one has to get the cost structure right, one has to align the market prices of the commodities specifically the coal and the end power price to a realistic level. Only then the whole value chain would derive some economic sense.
Q: This 70 percent is at the market price of coal or at an Fuel supply Agreement (FSA) price?
A: This is at the current price. If the price itself changes then of course one has to work out how the dynamics works but typically if one works even with the imported coal, the ratio wouldn’t change meaningfully.
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