CCI initiates investigation against cement price cartelisation; here’s how cos will get affected

In a setback for cement companies, the Competition Commission of India is examining possible cartelisation by conducting searches against various cement giants on a possible suspicion.

The Competition Commission of India has been receiving these complaints for almost 3-4 years now and after conducting internal investigations has started the search action. It was yesterday, especially in Mumbai, that a lot of cement giants got searched.

ACC and Ambuja Cements have confirmed that there has been some kind of visit from the CCI officials and added that they are cooperating with the officials.

Mangesh Bhadang of Nirmal Bang Securities said, “We were expecting the prices to increase from hereon and that was largely to pass on the increased cost pressure which is expected to come in in second half of the year and EBITDA per tonne as we know is on a higher side it is what they have witnessed in the first half. So if these investigations are going on there is a need for pricing to be sustained at current levels and for certain reasons we expect the pricing to weigh down, so it is going to have an impact on the EBITDA because, in my opinion, they will not be able to pass on the cost hike to the consumer.”

On setback for cement companies, Bhadang said, “In my opinion, the southern companies should get the maximum impact because demand has not revived the way it has happened across the country.   So pricing if it collects here even by say 4-5 percent the companies operating there like Dalmia Bharat, Ramco Cements, India Cements, those would be impacted.”

“Companies operating in the north, central region and then in a certain case in the eastern region there would be a relatively lower impact because the price hike in those regions is backed by very good demand growth and even the utilisation rates are higher. So the likes of Shree Cement, Birla Corp, Ambuja Cements the impact would be relatively low,” he added.

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