The Hindu Business Line : Priyadarshini Cement hits upper limit

REPORTS of promoters looking to offload their 50.67 per cent stake in Priyadarshini Cements saw the share hit the upper 20 per cent limit on the BSE today despite the company's denial of any such move. The stock closed at Rs 11.55 up 19.69 per cent with 8,951 shares traded on the BSE. On the NSE the stock closed at Rs 11.50 up 20.42 per cent with 28,548 shares traded.

Commenting on the trend at the counter today, brokers said that a large amount of interest in the Andhra Pradesh-based loss-making company was speculative following media reports. However, according to analysts while the timing may be a bit off, the deal is a possibility. As per reports, the promoters of Priyadarshini Cement have appointed IL&FS to find a strategic partner for the company.

"Given the current consolidation in the cement industry - Grasim-L&T, ACC etc — a lot of small capacities have only two choices. They have to either sell out or close down. And, given the fact that it is a good company with competent management, a sell out is a definite possibility. However, the promoters may be right in their decision not to sell now given the lacklustre market conditions. For valuations tend to depend on profits made, which with monsoon round the corner, is generally not robust," an analyst from a leading broking house said. Sources said the fact that currently the South is not really conducive for cement operations, in terms of the demand, supply scenario, could also be factored in while moving on a potential deal. "There are a number of capacities in that one area which is why cement prices are ruling weak," sources said.

The market was rife with rumours of potential buyers for the company, with Gujarat Ambuja leading the pack as the most favoured. Leading market participants, however, opined that given the proximity of GACL's, Chandrapur plant, it was unlikely the company would be interested. The company continues to be a shareholder and as of March 31, 2003, Gujarat Ambuja held a 5.03 per cent equity stake in the company.

"The big four are unlikely to be interested. It would have to be a cash rich mid-cap company with a long-term view so as to be able to recover cost of capital. However, they would have to wait it out for the next two quarters by which time one would see a definite consolidation in the industry," an analyst commented.

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