The Supreme Court (SC) ruling has declaring the coal block allocation process followed by the government (between 1993 to 2010) as illegal and 'apparently subjective' would create further overhang on the sector till the next course of action is decided by the SC.

''Whether these allocations would remain in effect is still undecided, and will be addressed in further hearings beginning on September 1. However, blocks allocated under the UMPP route were not challenged by the Supreme Court ruling. Stocks that have high exposure to captive coal blocks (Hindalco, JSPL) are likely to be impacted the most. However, an early resolution of the issue could provide much needed clarity for the sector to move forward and could pave the way for auction of mineral resources in India,'' said Barclays Capital.

''While it is difficult to quantify stock implications before the next course of action from the SC is known, we believe that the SC ruling would be an overhang on the sector in the near term,'' it opined.

''For JSPL, the SC ruling not only creates uncertainty on profitability from existing operational coal blocks but also on the profitability of the USD 2.6 billion investment in the Angul Steel & Power project as the associated Utkal B1 block is unlikely to be allocated now. For Hindalco, profitability of Mahan and Aditya smelters is to a large extent dependent on allocation of associated coal blocks (Mahan and Talabira-II). Tata Steel's Ganeshpur (thermal coal block) and Kotre Basantpur (coking coal block) allocation could also be impacted. Though JSW Steel's Rohne coal block was allotted in 2008, there was not much progress on this mine and hence we expect limited stock impact to JSW Steel,'' it added.

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