The Hindu Business Line : Subsidy offered by Tamil Nadu cement makers

The proposal by Tamil Nadu based cement companies to offer cement on a subsidised basis to economically weaker sections has seen investors turn bearish on cement stocks.

Stocks of major South-based players such as India Cements, Dalmia Cement and Madras Cements declined on Thursday, with a few shedding 2-3 per cent.

The other players in the region- Chettinad Cement, ACC, Ultra Tech and Grasim also faced some pressure. However, the proposal in its current form may not have a substantial impact on the overall profitability of players.

Revenue implications

Seven private cement manufacturers in Tamil Nadu — India Cement, Madras Cement, Dalmia Cement, Chettinad Cement, Ultra Tech Cements, Grasim Industries and ACC — have agreed to offer 20-lakh bags of blended cement every month to economically weaker sections in the State at a subsidised rate of Rs 200 per bag.

The cement manufacturers will also be reducing the price of cement supplied to the Government-run Cement Corporation by Rs 10 per bag.

The manufacturers have promised to supply 14-lakh bags a month to the corporation. This follows the Government’s warning last week to players in the State on rising prices.

However, the total commitment of about 34-lakh bags works out to only 4.1 per cent of the total monthly production of these manufacturers.

While this move may not have significant revenue implications, any further moves from the Government on regulation of cement prices will be watched for cues to earnings prospects of these companies.