NMDC’s fate hangs on outcome of Karnataka mining bill that increases royalty payable by company

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Subscribe to enjoy similar stories. NMDC Ltd's shares have declined about 20% since its December high, after the Karnataka (Minerals Rights and Mineral Bearing Land) Tax Bill, 2024, was passed by the state legislative assembly. The bill, pending the governor’s approval, substantially increases the royalty payable by mining companies.

Even though NMDC, the largest iron ore producer in India, can pass on the proposed levy, recovering past dues arising from a retrospective provision in the bill will be a challenge. Kotak Institutional Equities said the potential increase in taxes would have to be shared between NMDC and steel producers and would not be entirely passed on. While announcing its December quarter (Q3) results, NMDC said it has recognised a contingent liability of ₹13,510.90 crore against the bill.

“The proposed taxes by Karnataka, if fully absorbed by NMDC, would impact FY26 estimated Ebitda 12.6%/43.3% in case it is applied only in Karnataka/across all states," Kotak’s analysts said in a report on 10 February. The broking firm has not yet built the higher taxes into its base case, pending the final decision. The contingent liability could mean an impact of ₹15 per share.

The sharp drop in NMDC’s shares may have factored-in this uncertainty. The shares closed at ₹67.13 on the BSE on Thursday. “Given that NMDC’s stock price has already fallen by a similar amount since the announcement of the bill in December, we believe this development is largely factored into the current market price," Elara Securities (India) said in a 10 February report.