Cement stks dip as CCI raids cement cos on price cartelisation allegations

Shares of cement companies were under pressure at the bourses on Thursday, falling by up to 5 per cent on the BSE on profit booking after the Competition Commission of India (CCI) raided cement companies on price cartelisation allegations.

Following the news report, UltraTech Cement, Ambuja Cements, ACC, Ramco Cement, Star Cement, Orient Cement, Dalmia Bharat, JK Cement and Birla Corporation were down between 3 per cent and 5 per cent on the BSE in intra-day trade. In comparison, the S&P BSE Sensex was down 0.64 per cent at 45,810 points.

Ambuja Cements and ACC in a regulatory filing said, the CCI has initiated an investigation against cement companies in India including the Ambuja Cements and ACC regarding alleged anti-competitive behaviour.

“Ambuja Cements is of the firm view that it has acted and continues to act in compliance with competition laws and are fully cooperating with the investigation and providing all necessary information to the authorities. Ambuja Cements Limited has a long-standing commitment to fair competition as reflected in its Code of Business Conduct and Ethics,” it said.

In the past three months, most cement companies has outperformed the market by surging by up to 50 per cent, against 18 per cent rise in the S&P BSE Sensex.

ICRA expects cement demand to decline by 14 per cent-17 per cent in FY2021 as against the earlier estimates of 22 per cent-25 per cent given in July 2020.The sustainability of the pent-up demand especially from the rural markets and gradual improvement in the infrastructure activity has resulted in the revision of the estimates for FY2021.

After sharp correction in the off-take in the April-June quarter (Q1FY2021) and subsequent subdued demand scenario during the monsoons, there has been a rebound in the cement demand in September-October 2020, which is likely to largely sustain in October-March period (H2FY2021). While there has been an increase in the pet coke and diesel prices over the last few months leading to some cost-side pressures, the operating margins are likely to expand in FY2021 supported by still favourable power & fuel expenses and the industry’s pricing discipline, it said.

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