Economy

Cement cos wait for stay on CCI penalty to avoid provisioning

Our Bureau Mumbai | Updated on March 12, 2018 Published on July 09, 2012

Cement companies may have to soon provision for the Competition Commission of India (CCI) penalty in the price cartelisation case. The CCI order last month gave companies 90 days to pay a Rs 6,300-crore penalty.

The eleven companies that were penalised for price cartelisation have moved the Competition Appellate Tribunal against the order.

Mr Vinod Juneja, Managing Director, Binani Cement, said much will depend on the outcome of the appeal filed against the order. All the companies have appealed against the penalty and if it is stayed then there is no need for provisioning, he added.

The companies are ACC, Ambuja Cement, UltraTech Cement, Grasim Industries (now merged with UltraTech), Lafarge India, JP Associate, Century Textile and Industry, Madras Cements, Binani Cements, India Cements and JK Cement.

Mr Sudip Bandyopadhyay, Managing Director, Destimoney Securities, said the penalty on a core sector such as the cement industry will weaken the foreign and domestic investor confidence, which is already hit by the retrospective tax amendment and the 2G scam.

“In some cases the penalty imposed on cement companies is higher than a year’s earning. This could negatively affect the health of the company and jeopardise shareholder interest,” he said.

While cement manufacturers prepare for tedious litigation to defend their action, the stock market remains divided on the potential impact of the ruling, said Mr Murtuza Arsiwalla, Research Analyst, Kotak Institutional Equities.

“We remain concerned about the ramifications of the ruling on the pricing power so far enjoyed by the sector and its ability to sustain profitability in the face of rising cost pressure,” he added.

Though it is not a pre-requisite under competition law, CCI has no direct evidence on price cartelisation. It is relying on circumstantial evidence such as sharing pricing information, dissemination of plant-wise production and dispatches and representation of ACC and Ambuja Cement at high-powered committee meetings of the Cement Manufacturers Association even after the Holcim group companies ceased to be members of the Association.

Mr Basanth Patil, Senior Research Analyst, Dalmia Securities, said even if companies have to make provision it will not happen before the third quarter of this fiscal.

“However, we feel that all the companies will secure a stay order to avoid provisioning. The industry obviously does not want to be penalised for building huge capacity, particularly when the demand is not matching the capacity addition,” he said.

>suresh.iyengar@thehindu.co.in

Published on July 09, 2012

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
null
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.