Tata Steel remains a preferred pick for a separate reason — expectations of higher steel prices after the monsoon.
Vikash Singh, VP at ICICI Securities, and Rakesh Arora, founder of GoIndiaStocks.com, said companies with older mining leases could benefit if the Centre puts a cap on additional levies imposed by state governments. However, the extent of the benefit will depend on where the government sets the cap.
Arora remains cautious on the recent rally in metal stocks and prefers investors to book some profits at current levels.
“I would try to book some profits on these rallies.”
The Centre has introduced the MMDR Amendment Bill in Parliament, seeking to place limits on additional levies imposed by state governments on mining rights. The move follows concerns over additional charges imposed by states and aims to bring greater uniformity to the mining sector.
Singh, said states currently receive around 150% of the royalty, while the combined impact of royalty and other charges is around 42% in some cases.
Karnataka had proposed an additional 40% duty, but the move was not implemented after the Governor withheld approval and the matter was sent to the President. As a result, mining companies in Karnataka have not paid any additional levy so far.
NMDC could see the overhang ease
For NMDC, the immediate benefit from the proposed amendment is likely to be more sentiment-driven than financial, according to Singh.
NMDC has sizeable mining operations in Karnataka, where there had been a concern that an additional levy could make some of its mining operations unviable. Singh said the proposed amendment could remove this overhang.
“Financially nothing has changed.”
The benefit for companies with older mining leases will ultimately depend on the cap set by the Centre. Newer mines awarded through auctions are already subject to high premiums and are therefore unlikely to see a major impact.
SAIL could benefit from Jharkhand levy
SAIL could also benefit if the amendment leads to a rollback or change in the mining levy imposed by the Jharkhand government.
Singh said Jharkhand initially imposed a levy of ₹100 per tonne on iron ore, which was later increased to ₹400 per tonne. The levy has been charged for around the last one-and-a-half years.
It is still unclear whether the amount already collected would have to be returned or whether the new rules would apply only from the date of implementation. Any rollback could benefit SAIL.
Tata Steel remains a preferred steel pick
Separately, Singh remains positive on flat steel producers, with Tata Steel among his preferred picks.
He expects steel prices to increase once the monsoon season ends and demand picks up. Singh also said his firm has recently upgraded its view on SAIL.
The expected rise in steel prices could support the earnings outlook for flat steel producers, although the timing and extent of any price increase will remain key factors for investors.
Vedanta Aluminium remains positive
Singh also remains positive on the aluminium business, particularly Vedanta Aluminium.
His estimates factor in aluminium realisations of around $3,150 and $2,950, while aluminium prices are currently hovering around $3,200-3,300. A weaker rupee is another positive for aluminium producers.
Singh also prefers Vedanta Aluminium because of its backward integration advantage, which could support the company’s profitability.
UltraTech remains the preferred cement stock
The outlook for the cement sector is less constructive in the near term.
Arora identified UltraTech Cement as the strongest player, citing its continued market-share gains and ability to maintain healthy margins.
The broader cement sector remains out of favour amid the competitive tussle between UltraTech and the Adani Group. Arora expects to review the sector again in October when the busy season resumes.
For the entire discussion, watch the accompanying video
