Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
India Cements: Prices hold the key - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 9, 2003

    India Cements: Prices hold the key

    Poor realisations in the southern markets have affected most players adversely. The worst hit have been those players who have remained focused on the southern markets and have barely expanded their reach. India cements is one such player and in this article we will try to analyse the company's performance in recent times and study its future prospects.

    India cement is the largest producer of cement in the southern region. The company has a total capacity of 9 m tonnes and it enjoys a 28% market share in the southern region.

    *FY02 PAT almost nil

    The company's performance in FY03 was dismal. The drastic fall in realisations coupled with high interest burden, took a toll on the company's performance and as a result, the company suffered huge losses of Rs 2 bn. Had it not been for the tax writeback of Rs 1 bn, the company's income statement would have looked even worse. In a year where the industry grew 9%, the company's volume increased by a meager 3%, indicating the intense competition the company is facing in the southern markets.

    The company is a good example of how things can go wrong. Sensing the growth potential of the industry, the company decided to go in for mega acquisitions and financed majority of its deals with debt. This proved to be a cardinal mistake for the company because when the prices started falling, the company's topline came under pressure and as a result the company was unable to cope with the high interest burden. If one compares its interest coverage ratio with other cement majors, one can clearly see that it's the lowest among the four. The company at present has a huge debt burden of Rs 18 bn.

    However, there seems to be a light at the end of the tunnel for the company. With a view to reduce the finance cost of the company, the CDR (corporate debt restructuring) cell (formed by RBI) has approved a debt-restructuring program for the company and under this program, all debt excluding public deposits will be restructured and also additional working capital will released to the company after proper assessment. This is likely to give the company the much-needed time to set its house in order.

    The company is also trying to sell its subsidiaries such as Vishaka cements and Raasi cements so that the amount realised from the sale can be used to reduce debt further. However, given the poor financials of the company and the oversupply situation in the southern markets, the two subsidiaries are likely to get lower valuations than expected.

    The company's performance in the 1QFY04 has also been encouraging. It has managed to bring down the loss to Rs 100 m as compared to Rs 500 m in the same period of the previous year.

    Although, the company has got an approval for its debt-restructuring program, all its efforts are likely to come to a naught if the prices remain subdued in the medium to long term. Therefore, if the company has to revive its fortunes, prices hold the key. The stock is currently trading at Rs 31. The stock has recovered in the past few months mainly on account of its restructuring program and now with encouraging 1QFY04 results, one could safely say that the company has taken a small step towards its turnaround.



    Equitymaster requests your view! Post a comment on "India Cements: Prices hold the key". Click here!


    More Views on News

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    UltraTech: One of the Weakest Quarters in Years (Quarterly Results Update - Detailed)

    May 18, 2017

    Cement demand was weak because of subdued housing demand, volatile cement prices, and rising fuel costs.

    Ambuja Cem: Net Profits zoom up 361% YoY During Jan-March Quarter (Quarterly Results Update - Detailed)

    May 8, 2017

    Stock price jumps up on Ambuja-ACC merger talks...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 12:44 PM


    • Track your investment in INDIA CEMENTS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts