Government will have to act fast on coal block allocation case: Mehraboon Irani

In a chat with ET Now, Mehraboon Irani of Nirmal Bang Securities, shares his views on power stocks. Excerpts:

ET Now: Is there a floor for some of these power names after the double whammy that they recieved? - One being the order reversal from the Supreme Court for Adani and Tata Power and two, the coal block decision.

Mehraboon Irani: I will take them separately because the validity of the CERC order has been questioned by the Supreme Court as regards the power tariffs. It really undermines the role of a regulator in a country like India and I do not think it is fair. The Supreme Court, of course, is the real authority, and I am not disputing it. But what do you do with the regulator? Hence, it is a big let down that power tariffs are not allowed to be hiked.

What happened yesterday could be a catalyst for a correction which we are seeing. Nervousness should continue for at least a month. The Supreme Court’s role is to give a judgement. It does not tell you what should be necessarily done. Ultimately, the ball will be in the government’s court. They will be asked to set up a committee with new guidelines. They will possibly look at each individual cases and this could take months or maybe a year in the least.

What will ultimately happen is delay of reforms. There are quite a few decent names who are owning mines but are not doing anything about it. If you take away the mines from them and give it to more deserving players under a new set of guidelines which the Supreme Court may ask the government to do under a new committee, that will ultimately turn out to be positive over the longer term.

In the shorter term however, I feel there will be a lot of nervousness. The ball will fall in the government’s court and it will have to act fast.