One month has passed by since a heavy penalty was imposed by the Competition Commission of India (CCI) on the country’s top cement companies. But it has failed to dent sentiments in cement stocks. On the contrary, stocks of cement makers have outperformed the benchmark indices.
According to sector experts, further rise in cement prices across the country and continuous growth in demand at the rate of eight to nine per cent on the back of deficient rains this monsoon, have benefited cement counters.
For instance, shares of Kanpur-based JK Cement, one of the companies named in the CCI report, climbed a whopping 42 per cent since the order was made public on June 21. Shares of India’s largest cement manufacturer UltraTech Cement posted gains of over 10 per cent during this period. Stocks of Holcim-owned ACC and Ambuja too rose, albeit by a lower 1.6 per cent and 1.4 per cent, respectively.
STRONG SHOW
CCI's penalty on cement companies and the movement of their stocks |
| |
CCI penalty
(Rs crore) |
BSE price in Rs
|
| 21-Jun |
26-Jul |
%chg |
| JK Cement |
128.54 |
146.50 |
199.15 |
35.94 |
| UltraTech Cement |
1175.49 |
1463.55 |
1611.15 |
10.09 |
| Ambuja Cements |
1163.91 |
171.60 |
179.30 |
4.49 |
| ACC |
1147.59 |
1256.00 |
1261.00 |
0.40 |
| Madras Cements |
258.63 |
156.05 |
154.69 |
-0.87 |
| Century Textiles |
274.02 |
296.85 |
290.85 |
-2.02 |
| JP Associates |
1323.60 |
74.55 |
71.59 |
-3.97 |
| India Cements |
187.48 |
84.40 |
78.75 |
-6.69 |
| Source : CCI Data compiled by BS Research Bureau |
During the period, benchmark stock indices lost 1.1 per cent amid huge volatility in the market.
So, what’s helping the cement counters? Industry analysts Business Standard spoke to, said extended construction activity on the back of delayed monsoon helped in the northward move of the stocks of cement makers, which would mean better profits for the companies. According to cement dealers, the all-India average price of a 50-kg bag of cement touched Rs 300 after slipping marginally to Rs 290 during the middle of the quarter.
Besides, if UltraTech’s financial performance for the April-June quarter is anything to go by, it appears its peers too, would come up with good results. The Aditya Birla group company posted a rise of 14 per cent at Rs 778 crore during the quarter ended June, against Rs 683 crore in the corresponding quarter previous year.
Company officials maintain that FY13 will end with a growth of eight per cent mainly on the back of a push for the infrastructure sector from the central government. Quarterly performance of ACC and Ambuja are to be released this week. According to reports by brokerages, both companies will see rise in profits on a year-on-year basis.
During the months of April and May, the cement sector posted sales growth of 6.3 per cent and 13 per cent, respectively. Numbers for June are not available since CCI’s order barred industry lobby Cement Manufacturers’ Association (CMA) from collecting sales and production data from its members. However, according to dealers and sector experts, June too is likely to see sales growth of at least 9-10 per cent.
Currently, India’s cement sector has an overall capacity of 330 million tonnes per annum. In FY12, the industry grew by 6.43 per cent, higher than the earlier estimate of six per cent. In the twelfth five-year plan (2012-17), cement makers are targeting to add over 150 million tonnes of fresh capacity to their kitty.
