Grasim suffers jolt as Shree Digvijay is referred to the BIFR
Shree Digvijay Cement Limited (SDCL), 62% owned by the Aditya Birla Group, has been referred to the Board for Industrial and Financial Reconstruction (BIFR). The company operates a 1.25 MMT cement plant on Gujarat and was recently acquired by the Birla Group.
In what has been termed as a nightmare for the Birla Group, SDCL has incurred losses of over Rs 510 m during the first five months of the 18-month financial year. The company's networth of Rs 187 m has been completely wiped out and therefore the referral to the BIFR.
One of the main reasons for the losses at SDCL has been the high operational cost due to the lack of availability of limestone near the plant and a bloated work force. As these factors existed even at the time of the feasibility study, it is yet uncertain why the group went ahead with the take over. One possible reason could be the all weather jetty owned by SDCL.
The referral to the BIFR is likely to trigger questions regarding the rationale behind the deal. In the meantime, the management will need to do some hard thinking, as it has been the acquisition mode for sometime now.
Analysts have rated Grasim as a 'BUY' mainly on account of the turnaround in the cement industry and various other commodity businesses the company operates in.
Larsen & Toubro (L&T) has announced third quarter results of financial year 2016-2017 (3QFY17). The company has reported 1.7% YoY growth in sales while profits have grown 38.9% YoY. Here is our analysis of the results.
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