stock prices dived after MRTPC issued notices to 14 cement companies for cartelisation
including ACC, India Cements, Ambuja Cement, JK Cement and others.
has ordered a probe into the business practices of the cement manufacturers. There
are allegations that they have acted in a cartel and colluded to hike prices.
partner at Notz Stucki maintains that there is no substance for the MRTPC notice
against cartelisation. He said, "The period they are taking is 2005-2006,
for which the DGI has filed the report. There is a preliminary investigation filed
by two builders. I saw the complete complaint and there was no truth in the complaint
and there was no substance as well."
doesn''t even think there was any substance in this for even DGI even to have sent
this report to MRTPC.
RG Bagla, group executive president at JK Cements has completely denied the possibility
of cartelisation due to competitive pressures. He has denied receiving any notice
from MRTPC so far either.
there are 20 competitors operating in a market, how there can be a cartel. There
is demand and adequate supply, so there is no question of any cartel or any consulted
effort by anybody," is his retort.
all practical purposes, cartelisation is the most difficult thing in the work
to prove, but the question certainly begs asking and the cement companies will
have to answer. But more than that, this move has dampened sentiments, which is
seen in the stock prices movement.
Choksey of KR Choksey Securities expects cement stocks to suffer a knee-jerk reaction
because of the inquiry. His explanation is, "Unfortunately nobody realises
that there is a demand-supply gap existing. Because of higher demand, obviously
the commodity has a tendency to move up and cement is no exception, given the
construction boom in the country."
Soni, CIO at Deutsche Asset Management has some exposure in cement. They are not
overweight on the stocks, but they have a market wide exposure in cement and the
stocks have always reacted negatively to the news.
said, "But I would believe it will be a long-term bet and it will take MRTPC
long to establish that there is a case against the cement companies. I would also
assume that there is decent fighting chance for cement companies, because the
price rise has largely happened particularly when the capacity utilisation was
going up. The capacity utilisation
in the sector has been 94 per cent-95 per cent and the price rise is rather normal
in that sense. So one should probably look at dips as a buying opportunity rather
government said the case will come up for hearing on 25 October. Government has
prima facie proof of cartelisation in the cement industry.