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| Share market not impressed at Grasim cement demerger |
| Palak Shah / Mumbai Oct 06, 2009, 01:24 IST |
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The share price of cement major Grasim Industries fell by 7.1 percent or Rs 191.7 to close at Rs 2,509 on the Bombay Stock Exchange (BSE) today, as the cement business demerger formula of the company did not go well with market players. The key benchmark equity index, the Sensex, was down 1.56 percent.
On Saturday, the AV Birla Group decided to hive off the cement business of Grasim Industries into its unit, Samruddhi Cement Ltd. (SCL), in a cashless transaction and later merge it with group firm Ultratech Cement. While the move is aimed at consolidating the group’s cement businesses into a single entity over the next eight to 10 months, analysts feel the holding company discount may lead to lower valuations.
“The current restructuring does not offer any organisation synergies and therefore we do not expect any earnings upside. We maintain a Sell on Grasim with a target price of Rs 2,085, implying a downside of 22 percent and a Sell on Ultratech with a target price of Rs 600, implying downside of 30 percent,” said Mumbai-based Ambit Capital.
The share price of Ultratech Cement fell 5.19 percent or Rs 44.05 to close at Rs 804 on the BSE. JP Morgan cut its price target to Rs 2,300, expecting the stock to come down from its current level of around Rs 2,500.
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