"Tata Steel and NMDC Shares Under Pressure: The Impact of Renewed Tax Uncertainty"

A Supreme Court bench led by Chief Justice DY Chandrachud has ruled that states can collect past dues in the form of royalty and tax dating back to April 2005. In delivering this decision, Chief Justice Chandrachud stipulated that the payment demands for these taxes should be staggered over a period of 12 years, starting from April 1, 2026.

The court dismissed a request from the Mineral Area Development Authority for states to only collect these levies prospectively. As a result, mining companies like Tata Steel have experienced significant stock market declines, with Tata Steel's shares falling by more than 3.6%, marking the lowest point of the day.

Tata Steel had previously acknowledged during its quarterly results that it had set aside ₹17,300 crore as a contingent liability in anticipation of potential retrospective claims from the state of Odisha. This provision underscores the significant financial impact that the Supreme Court's ruling could have on companies with mining operations in affected states.

 Hindalco’s management noted that they would remain unaffected by the retrospective claims since they currently have no pending liabilities of this nature. explained that three states—Odisha, Jharkhand, and likely Tamil Nadu—are primarily impacted by this ruling, with companies holding mining assets in these states facing substantial financial challenges due to the retrospective tax. However, the court’s decision to allow staggered payments provides some relief, mitigating the immediate financial burden on these companies, though it still directly affects their net asset values (NAVs).

Hindustan Zinc's management expressed concern that an adverse judgment could negatively impact all mining companies, including state-run entities. CEO Arun Misra emphasized the importance of balancing economic productivity with tax collection, suggesting that any decision should be made with careful consideration of the broader economic implications.

As of now, Tata Steel's shares have dropped 3.1% to ₹144.23, while NMDC's shares have declined by 3.8% to ₹215.91. MOIL’s shares have also decreased by 3.4% to ₹409.25, and GMDC's shares, which saw significant earlier gains, are currently trading 1.2% lower at ₹358. These market reactions reflect investor concerns over the potential financial strain on these companies due to the Supreme Court's ruling.