N. Srinivasan, MD, India Cements and BCCI Chief, reached out to reassure investors and shareholders through an analyst conference call on Tuesday, in his first such attempt since the spot-fixing controversy erupted. Downplaying the impact of the scandal on the company, Srinivasan maintained that the present controversy would not have any impact on the company’s profitability.
Alludes to water issue
He also alluded to media reports in his company’s embroilment in a water purchase issue and denied any wrongdoing by the company.
According to media reports last month, CBI in their status report to Supreme Court had stated that India Cements had made illegal quid-pro-quo investments to the tune of Rs 140 crore into the group companies of Y.S. Jagan Mohan Reddy and had received several benefits in the form of permission granted for utilisation of additional quantity of water from Kagna and Krishna rivers and lease of land.
A cement stocks analyst who did not wish to be named said: “Srinivasan denied media reports that water was purchased by the company through a separate contract and maintained that there was no specific contract for purchase of water and that it was a part and parcel of the overall contract.”
“He further said that India Cements had invested in Bharti Cement owned by Jagan Mohan Reddy with the expectation that it would have an opportunity to buy the company when the previous owner exited. However, the exit price offered by a foreign company was higher than the price offered by India Cements, so the foreign company purchased Bharti Cement leading to India Cements exiting their stake at a profit.”
Dip in profits
According to analysts who attended the concall, Srinivasan also clarified that the company was undergoing a steady decline in net profits owing to its cost of production being higher than the peers by Rs 100 a tonne. “Srinivasan admitted to their higher costs owing to lack of a captive power source. He said the company was trying to address this problem by installing a captive power source.”
Most analysts have not re-rated their stock rating and target price as yet, keeping in mind only the profitability of the company.“ But the constant steam of negative news flow about the head of the company has made investors fearful. It doesn’t look like this overhang of the company head focusing on cricket is going to go away anytime soon,” added the cement analyst.
The scrip of India cements which has seen a heavy correction since the controversy continued to slide on Wednesday and closed at Rs 65.40, down 4.04 per cent on the BSE.