Shares in Jindal Steel and Power Ltd were heading towards their biggest daily loss in almost two years on Monday, hit by concerns over the company's ability to feed its power plants after the rejection of its bids for three coal mines auctioned by the government.
Stocks of the company, controlled by former lawmaker Naveen Jindal, fell as much as 14.9 per cent before paring some losses to trade down 8.66 per cent around noon on Monday, while the benchmark BSE Sensex was up 0.14 per cent.
Separately on Monday, a company source told Reuters that Jindal Steel, which said it was "puzzled" by the government's decision over the weekend to reject the bids, will take the government to court over the cancellations.
The absence of coal blocks for the company's power business leaves its 3.4 gigawatt (GW) of capacity near-stranded with linkage of only 1.2 GW in place, analysts at brokerage Kotak Institutional Equities said in a report to clients.
"Limited linkage and the absence of captive coal blocks would make imports an expensive and logistically difficult choice for fuel," the report added.
The loss of the coal mines will have an adverse impact on the load factor of Jindal Steel's power plants in Chhattisgarh where the mines in question are located, chief executive Ravi Uppal said in a television interview. "The present government is working so hard to see all the stalled projects become functional.
Here we have a project which is functioning and I see no reason that anything should be done which will cause a functioning project to become a stalled project," Uppal told ET Now news channel.
India rejected winning bids for four of 33 coal mines put up for auction in the past two months, after the coal ministry had examined nine blocks whose surprise low bids prompted the designation "outliers".
The move to re-examine "price discrepancies" drew criticism from industry watchers, with some experts saying reassessing the auctions after the posting of the highest bids sends the wrong signal to the market ahead of more auctions.
"Unfair to even suggest that the bids were low, infact the bids were substantially above the base prices set by the government," chairman Naveen Jindal said in a Twitter post on Saturday.
