|Market Commentary||Friday, June 22, 2012 08:56 Hrs IST|
Investors will watch cement shares after CCI order
Shares of select cement companies will be in focus after the Competition Commission of India (CCI) found cement manufacturers in violation of the provisions of the Competition Act, 2002, which deals with anti-competitive agreements including cartels. The order was passed pursuant to investigation carried out by the Director General upon information filed by Builders Association of India. CCI has imposed penalty on 11 cement manufacturers at 0.5 times of their profit for the year 2009-10 and 2010-11. The penalty works out to more than Rs 6000 crore. The news of CCI penalty hit the market after trading hours on Thursday, 21 June 2012.
The cement manufacturers upon whom the penalty has been imposed are ACC, Ambuja Cements, UltraTech Cements, Grasim Cements (now merged with UltraTech Cements), JK Cements, India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India and Jaypee Cements. While imposing penalty, CCI has considered the parallel and coordinated behaviour of cement companies on price, dispatch and supplies in the market.
CCI found that the cement companies have not utilised the available capacity so as to reduce supplies and raise prices in times of higher demand. CCI has also observed that the act of these cement companies in limiting and controlling supplies in the market and determining prices through an anti-competitive agreement is not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in construction and infrastructure industry vital for economic development of the country. The contravening cement manufacturers have been directed to deposit the penalty amount within 90 days. They have also been directed to cease and desist from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market.
CCI has also imposed penalty on the Cement Manufacturers Association (CMA). CMA has been asked to disengage and disassociate itself from collecting wholesale and retail prices through the member cement companies and also from circulating the details on production and dispatches of cement companies to its members.
ACC informed that the CCI has imposed a penalty of 0.5 times of the profit for the year 2009-10 and 2010-11. For ACC the amount works out to Rs 1147.59 crores. ACC said the order relates to competition law proceedings initiated in 2010 which aimed at investigating the conduct of several leading cement producers in India. ACC said it has furnished all information and clarification requested by the authorities in the context of the investigation. The company feels aggrieved by this order and will appeal against it before the Competition Appellate Tribunal, it added.
Ultratech Cement said that the CCI has imposed penalty of Rs 1175 crore against the company. The company will take appropriate action after having fully examined the order, it added.
Ambuja Cements said that the CCI has fined the company Rs 1163 crore. The order relates to the competition law proceedings started in 2010 which aimed at investigating the conduct of several of leading cement manufacturers in India including Ambuja Cements. In the context of the investigation, Ambuja Cements said it has delivered all the information and clarifications requested by the authorities. However, Ambuja Cements contests the allegations and findings against the company. Ambuja Cements said it will appeal against this order to the Appellate Tribunal and will seek a stay on the aforesaid penalty.
Metal shares may witness selling pressure after LMEX, a gauge of six metals traded on the London Metal Exchange, fell 2.58% to $3,141.30 on Thursday, 21 June 2012.
Shares of public sector oil marketing companies may edge higher after US crude-oil futures settled below $80 a barrel Thursday for the first time since October 2011, as the oil markets were hit by a host of factors, including fresh signs of weak industrial activity.
Oil futures for light sweet crude on the New York Mercantile Exchange settled at $78.20 per barrel, down $3.25 or 4%, piercing the psychologically important $80-a-barrel level.
Lower crude oil prices will decrease under-recoveries of public sector oil marketing companies (PSU OMCs) on domestic sale of diesel, LPG and kerosene at controlled prices. The government has already freed pricing of petrol.
Meanwhile, shares of Cairn India may witness selling pressure as lower crude oil prices will result in lower realization from crude sales for oil exploration firms such as Cairn India.
Tata Motors said that P.M. Telang, Managing Director - India Operations, on Thursday, 21 June 2012, retired from the company on attaining the age of superannuation and stepped down from the Board of the company. Tata Motors said it has appointed two new Executive Directors. Ravindra Pisharody, President - Commercial Vehicles Business Unit, has been appointed Executive Director (Commercial Vehicles). Satish Borwankar, Senior Vice-President (Manufacturing Operations - Commercial Vehicles Business Unit), has been appointed Executive Director - Quality, Vendor Development & Strategic Sourcing for Tata Motors.
Reliance Industries (RIL) and its partners BP and Niko Resources reportedly plan to invest $4 billion to develop satellite fields in the D6 block, where the operator is also keen to explore for more hydrocarbons that may lie beneath the fields already under production.
Reports also suggested that RIL had approached the directorate general of hydrocarbons saying there may be more oil or gas under the reservoir of the D1 and D3 field, raising prospects of reversing the sharp fall in production from the block.