Jindal Steel wins back coal mine

JINDAL Steel & Power jumped the most on record yesterday after winning back a coal mine it had to surrender after a Supreme Court order last year.

The stock jumped 26% to 195.35 rupees ($3.2) at the close in Mumbai, the steepest surge since the shares started trading in January 2000. India is conducting coal mine auctions after the nation’s top court in September cancelled 214 of the 218 coal mine permits given to companies, calling the allocations “arbitrary and illegal.”

Winning back the Gare Palma2 and 3 mine in the central state of Chhattisgarh is crucial for Jindal Steel as those deposits are needed to feed the company’s power plants with a generation capacity of 2.8GW in the same province. The mine produces 6.25-million metric tons a year, making it Jindal’s biggest by output, according to a company presentation.

“Today’s development provides much-needed visibility and hence the bounce back” in the share price, said Ambareesh Baliga, managing partner of global wealth management at Edelweiss Financial Services in Mumbai, in a Bloomberg TV India interview.

The stock declined 42% in 2013 and last year each following controversy about coal-block allocations and a court-directed probe into it.

Jindal Steel entered the lowest bid of 108 rupees a ton for Gare Palma 2 and 3, according to the website of MSTC, which is conducting the electronic auctions.

The block was bid for in a reverse auction, where the lowest bidder wins, to help reduce the cost of coal and electricity.

The offers proceed downward from an upper limit which is based on Coal India’s price for a similar grade of coal.

The win was Jindal Steel’s first among 14 auctions concluded so far. Hindalco Industries, CESC and Essar Power MP are among the other winners. The government plans to auction 18 coal blocks by Sunday. All of them are producing mines.