N Srinivasan's India Cements May Be Hitting Sixes But The Pitch Is Set To Get Trickier

Shares of cement companies showed intraday gains on Wednesday, with The India Cements Ltd., UltraTech Cement Ltd., Dalmia Bharat Ltd., Ramco Cements Ltd. and Ambuja Cements Ltd. rising between 2% to 15%. Among individual stocks, shares of the Chennai-headquartered The India Cements Ltd. rallied up to 15% to hit a day's high of Rs 267.50 apiece on the National Stock Exchange. On the Bombay Stock Exchange, it surged 14% to Rs 262.15 during intraday trade. The surge comes on the back of an over fivefold jump in average trading volume.A combined 38.07 million shares, representing 12% of total equity of India Cements, have reportedly changed hands on the NSE and BSE. As per the shareholding pattern of India Cements for the quarter-ended March, Radhakishan Shivkishan Damani and Gopikishan Shivkishan Damani have collectively held 20.78% stake in the company.No doubt the surge in price has happened across the cement stocks. Analysts and others see in it a robust demand for cement, especially with several infrastructure projects under way across the country. Nevertheless, the rise in stock price of India Cements has triggered fresh curiosity among the long-time watchers of the N Srinivasan-led cement-maker..For assorted reasons—including the way India Cements dominated the southern market once and the media focus on Srinivasan, a former president of the Board of Control for Cricket in India—the company has remained under the arc light for a long time. Read in conjunction with the shareholding of Damanis in the company, the unexpected rise in stock price and trading volume has sent tongues wagging.Nearly 12% of India Cements' shares has changed hands in the open market. A guessing game is already on as to its buyers and sellers. Have Damanis eased their shareholding in India Cements? Who are the buyers? The speculation has turned intense.According to top sources who requested anonymity, Damanis have chosen to remain as investors. They never exhibited any aspirational intent vis-à-vis India Cements. It's gleaned from highly-placed sources that they weren't averse to selling their shares in one go to the promoters. Of course, it has huge financial implications for the promoters. Viewed in this context, the puzzle over the stock price rise appears trickier. Considering the recent happenings in the cement arena—especially around the southern side of the country—however, the quiz is turning even more exciting.India Cements, at the moment, is running with a huge constraint vis-a-vis its peers in the field. It has a lot of legacy plants around it. This makes it difficult for it to jostle for its rightful place in an environment which is turning competitive by the day. Legacy plants are adding up to its production cost, making it uncompetitive in the marketplace. India Cements has indeed woken up to this—albeit a little late. But it has, in the meanwhile, yielded place to competition.What's hurting India Cements at the moment is its inability to sell more at a time when the demand is picking and input costs (like coal price) are sliding. A combination of legacy plants and working capital shortage is proving to be a big stumbling block for India Cements at the moment. Based on the advice of a global consultant, the company has already taken steps to modernise its plants—in a calibrated manner, though. But then, it will take at least a little while for the modernisation exercise to complete. Until then, the competition has a clear advantage.Problems notwithstanding, knowledgeable sources say that India Cements has an asset-rich balance sheet. It also has substantial land assets. The management has already indicated that they won't fight shy of quitting unproductive land assets to tide over funding needs. In fact, it has sold a few land parcels. It recently sold a grinding unit at Parli in Maharashtra..Late last year, India Cements inked a pact with UltraTech Cement for the sale of 73.75 acres of land in Vizianagaram district of Andhra Pradesh for Rs 70 crore. In October 2022, it sold its limestone mining subsidiary Springway Mining (SMPL) to Parth Jindal–led JSW Cement for Rs 476.87 crore in October last year. SMPL owns limestone-bearing land in Madhya Pradesh, where it's setting up a cement plant. Limestone is an ingredient used in making cement. India Cements had acquired SMPL in October 2018 for Rs 182.92 crore and its sale four years later was a reflection of the reality faced by the largest cement producer in south India.India Cements is also seeing an organisational change with the old guard yielding place to newer professionals. With Srinivasan himself in the later side of the 70s, the company is going through a crucial phase as it tries to retrieve past glory. Long-time watchers of India Cements are looking for clarity on the way forward..Note: This story was published before Ultratech Cement buying 23% stake in India Cements announcement. Read here..KT Jagannathan is a senior financial journalist based in Chennai. He has been in business journalism for over three decades, covering corporate developments and critical industry verticals. He is the co-founder of www.carnaticdarbar.com, a news website for Carnatic music, a niche art form..The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.

N Srinivasan's India Cements May Be Hitting Sixes But The Pitch Is Set To Get Trickier

Around 38.07 million shares, representing 12% of total equity of India Cements, reportedly changed hands on the NSE and BSE on Wednesday.

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