Did they randomly change to buying 100% of Arjas; instead of the 80-20 split between company and promoter?
will proposed tax, will get implemented as it is?
or congress supportive sandur will be able to get it diluted?
and if gets implemented, Can sandur survive this abnormal tax hike?
will arjas offset the loss in operating profit due to tax?
@ayushmit what are your thoughts about this proposed tax ? Will it be a major dent on the profitability given this legislation
The Karnataka government has proposed the Karnataka (Mineral Rights and Mineral Bearing Land) Tax Bill, 2024, which aims to introduce taxes on mining operations. Here’s a summary:
Summary of the Proposed Tax:
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Tax on Mineral Rights: The bill proposes to levy a tax on the exercise of mineral rights. The tax rates vary based on the type of mineral; for instance, iron ore, manganese, and bauxite are proposed to be taxed at ₹100 per tonne, copper ore at ₹50 per tonne, limeshell at ₹20 per tonne, and gold byproducts at ₹50 per tonne. Other unspecified minerals would be taxed at ₹40 per tonne.
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Tax on Mineral-Bearing Land: Additionally, there’s a proposed tax on land that bears minerals, which would also contribute to the state’s revenue.
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Revenue Expectations: The government anticipates generating approximately ₹4,207.95 crore from the mineral rights tax and an additional ₹505.9 crore from the tax on mineral-bearing land annually.
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Impact: This taxation is expected to significantly affect companies like NMDC Ltd., Vedanta Ltd., and Sandur Manganese and Iron Ores Ltd., which operate in Karnataka. The increased cost could potentially lead to higher iron ore prices and affect profitability.
Applicability Date:
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Retrospective Effect: The tax on mineral-bearing land can be applied retrospectively from April 1, 2005, while the tax on mineral rights is applicable from January 12, 2015.
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Implementation: Although the bill has been tabled, the exact date for when these taxes will start being enforced post-passage is not explicitly stated, but it’s anticipated that they would commence once the bill becomes law. However, posts on X suggest an effective date of April 1, 2025, for at least some aspects of the tax, like on iron ore.
Since its applicable retrospective from 1st April’ 2005, there will be huge payout, we need to wait once its get passed and what are payout options to companies, there will be huge impact on cash flows.
Impact on Sandur
Management - no press release by management on impact of this act, what can be payout and impact on cost increase, what is %age of this cost they can pass out, final profitability impact, cash flows and impacting future strategic plans.
1 - Cash flows - we need to wait for further details of acts to come and management comments.
2- share price already dropped from 500 to 400 - 20% drop
3- company plant to move iron ore from Karnataka to Arjas plant to AP, now proposed mining tax of 1.5 times of royalty will have significant impact of cost increase, cost benefit due to acquisition will not be there.
4 - can they pass on this mining tax to their customers and what is their position on agreements with customers.
Integration with Arjas explained
Good thing Management understands what investors want to know thereby keeping things relevant.
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Last year i.e. FY 2023-24 Arjas Had TO of 2608 cr. And PAT of 32.81 cr.
Will be interesting to see how supply of RM from SANDUR to Arjas as to quantity and the price wise impacts SANDUR consolidated results in FY 2025-26.
Invested and Not an advice
As steel sector is seeing some revival overall, arjas steel will do even better from here.
And even mining sector is seeing uptick as guided by management.
Hoping for the good upmove in short to medium from this stock, as business is doing and generating good revenue and cash flow.
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Price increase in manganese ore upto 10%.
Margin will expand further.Q4 will be Interesting watch. Full arjas steel impact plus demand picking up in mining.
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