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India Cements Limited (ICL) has said the company was planning to restructure its non-core business so that it could focus on the core business (cement) and increase valuation.
As part of this, it is planning to partially or fully exit the businesses, which are not relevant to the company. “We are working on whether to merge, hive-off or to sell to make all these businesses profitable and if we can grow independently,” N Srinivasan, vice-chairman and managing director, India Cements Ltd, said.
The company has nine subsidiaries, including ICL Financial Services, Industrial Chemicals and Monomers Ltd and ICL Securities.
It is also planning to merge Trinetra Cements Ltd, a subsidiary with a capacity of 1.5 million tonne at Rajasthan, and also looking at hiving off its infrastructure business into a separate entity.
The company said its capacity utilisation had increased to 77 per cent in June from 67 per cent a few months ago on the back of increase in demand and rising cement prices. He noted, prices at the company’s key markets — Andhra Pradesh and Tamil Nadu —increased from Rs 195 to Rs 295 a bag and from Rs 300 to Rs 325 respectively.
However, according to Srinivasan, the increase has not been enough to compensate the increase in input costs. “The high cost of power purchase in Andhra Pradesh coupled with frequent hike in diesel costs in the last few months dented the company’s margins,” he said.
The company hopes to bring down the costs substantially with the launch of its 50-Mw captive power plant at Vishnupuram unit in Andhra Pradesh. This, it said, would show positive impact on its margins from the next quarter. As against the grid cost of Rs 5 per unit, the company is currently buying at Rs 10 a unit from outsiders.
Srinivasan admitted the IP controversy had impacted the market cap and share price and attributed this to the “adverse campaign” by the media on the spot-fixing issue.
“This is just a temporary phenomenon and we don't see any negative impact on our future. At present, our focus is on ways to increase our capacity utilisation to 14 mt from the current 10 mt,” said Srinivasan.
It may be noted, Srinivasan's son-in-law was alleged to be part of IPL spot-fixing and was later granted bail. The controversy even made Srinivasan to step aside as the BCCI president.
On the investors' perception that per tonne valuation of the company had gone down to $60 as against the current market price of over $200 a tonne, Srinivasan said: “They (investors) felt that the company has been focusing more on other businesses than cement. Actually our per tonne valuation should have been at $150 a tonne. Keeping this mind, we have decided to trim the non-cement business activities.”
| India Cements Ltd said -- it is not involved in wrongdoing with its investment, subsequent sale in Bharathi Cements. Reports stated -- investigating agencies may question India Cements for holding stake in Bharathi Cements, owned by Jagan Mohan Reddy, son of former Andhra Pradesh Cheif Minister Y S Rajasekhara Reddy |
| N Srinivasan, VC, MD says the company hasn't done any wrong with investment. Says -- saw a good opportunity considering Bharthi Cement location. Also had a plan to increase our stake, but they found a buyer who offered a better price and we also sold our stake and booked a profit of around Rs 25 crore”. |
| Company invested around Rs 95 crore in Bharati Cements, exited two years back. Asked whether the company will exit from Andhra Pradesh-based Jagati Publications is one of the largest media houses in South India and owns Sakshi TV and Sakshi Newspaper among other businesses and run by Jag Mohan Reddy, Srinivasan said “we may look into it”. |
| "It was not that we were interested in publication business. We were only interested in cement. However, they offered all three as bouquet. Overall our company has invested around Rs 130-135 crore". |
| ICL's Rs 40 crore investment in the publication house is on the radar of the Central Bureau of Investigation, which has alleged that India Cements pumped money into Jagan Mohan Reddy's firms in return for business favours. |
