The stock prices of five out of seven cement companies took a hit on Friday after Competition Commission of India (CCI) on Thursday imposed nearly R206-crore fine for bid-rigging and capitalisation. The order came after the market hours. Shree Cement, UltraTech Cement, Jaiprakash Associates, J K Cement, Ambuja Cements, ACC and JK Lakshmi Cement were penalised for violating competition norms with regard to a tender floated by a Haryana agency in 2012.
In its order, CCI directed the companies to “desist” from indulging in the acts that have been found to be in contravention of the provisions of the competition Act. Further, the regulator decided to slap penalties on the companies that are equivalent to 0.3% of each of their average turnover for the past three financial years. The stock prices of Shree Cements, Jaiprakash Cements, Ambuja, ACC and JK Lakshmi Cements fell anywhere between 1-3%.
Jaiprakash Associates, which got a penalty of R38 crore, was the most hit with its stock prices falling over 3.7% in Friday’s trade. ACC and JK Laksmi cement fell by over 2%.
However, the stock price of Ultratech, which got the maximum penalty of R68 crore, did not fall. CCI’s order was in response to a complaint by director, supplies and disposals, Haryana – the procurement agency – which alleged that these companies had formed a cartel and quoted higher bids for a tender floated in 2012. Stocks of cement companies took a hit following the Centre’s decision to withdraw high denomination notes on November 8. The stock prices of many top companies fell over 20% during the period from November 8 to the end of December 2016.
However, Prime Minister Modi’s announcement on December 31, 2016, aimed at boosting rural and urban housing, brought some cheer to cement stocks and pared some of their losses.
In a note to investors, Kotak Institutional Equities said that the drop in realisations coupled with an unfavourable volume base, and the full impact of rising pet-coke prices threaten to make Q4 FY17E among the “weakest quarters in recent times” for cement companies.
AK Prabhakar, head of research, IDBI Capital, said that there is no trigger for stock prices to go up in a big way unless there are some measures in the budget to boost spending on infrastructure.