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Eleven cement companies will be forced to make a provision of Rs 669 crore in the June quarter for the Rs 6,698-crore penalty levied on them by the Competition Commission of India.
In the cement price cartelisation case, the Supreme Court has asked the 11 companies to abide by the Competition Appellate Tribunal directive to make this provision.
Given the slow demand and rising cost for the cement companies, the provisioning is bound to have a serious impact on their bottomline.
Investigating a complaint filed by the Builders’ Association of India, a lobby group of engineering and construction contractors, the Competition Commission of India last June found 11 cement companies, including ACC, Ambuja Cement and Grasim Industries (now merged with UltraTech Cement), indulging in a price cartel. The Commission slapped a fine of Rs 6,698 crore on these companies, which in turn, moved the Competition Appellate Tribunal against the order. In May this year, the Tribunal ordered the companies to deposit 10 per cent of the fine before it could hear their appeal. Unhappy with the demand, cement manufacturers moved the Supreme Court. Last month, the apex court refused them any relief. Milan Watkar, Research Analyst, Indsec Securities, said after the Supreme Court ruling, companies now have to make the provision in the June quarter. The financial impact would depend on the cash flow of the companies, he added.
“In the June quarter, the performance of cement companies was quite challenging. It was marred by drop in sales volumes and fall in prices. The increase in diesel price is also set to have an impact on the cost front,” he said.
The top four cement companies — ACC, Ambuja Cements, UltraTech Cement and Jaiprakash Associates — were fined in excess of Rs 1,000 crore each. Others that were fined include Grasim, JK Cement, India Cements, Madras Cement, Century Cement, Binani Cement and Lafarge India. These companies were fined 50 per cent of their average profit for fiscal years 2009-10 and 2010-11, the period for which they were investigated.
> suresh.iyengar@thehindu.co.in
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