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Money spinner: Cement rally turns Shree Cement promoter as India’s 14th richest person

The Economic Times

To say that cement stocks have been among the top beneficiaries of the ongoing rally in the domestic market will be no exaggeration.

To say that cement stocks have been among the top beneficiaries of the ongoing rally in the domestic market will be no exaggeration.
Data compiled by ETMarkets.com showed 37 BSE-listed cement stocks have seen their combined market cap surge by Rs 1.4 lakh crore from their February lows to touch Rs 3.40 lakh crore on Thursday. This is 64 per cent higher than the Rs 2.07 lakh crore market capitalisation that these 37 companies commanded on February 29.
At Friday's intraday high of 28,750, the 30-index Sensex is up 27 per cent since February 29, broadly underperforming 30 of the 37 cement stocks, which have rallied anywhere between 30 per cent and 225 per cent during this period.
Promoters of the cement companies have in fact seen their combined market-cap swell by Rs 79,170 crore since March. Kolkata-based Benu Gopal Bangu, who promotes Shree Cement, is now the 14th richest person in India, with a net worth of $5.9 billion, according to the Forbes annual richlist released recently.
The market-cap of 11 of the cement firms has been ruling above Rs 10,000 crore against four at the end of February.
The market-caps of Dalmia Bharat (Rs 15,920 crore), Ramco Cement (Rs 14,481 crore) and Century Textiles (Rs 10,058 crore) have risen above Rs 10,000 crore. UltraTech Cement, meanwhile, has breached the Rs 1 lakh crore m-cap mark.
The BSE Sensex had hit its 52-week low of 22,494 on February 29 this year.
Analysts said average fuel prices for cement companies have jumped 18-30 per cent QoQ in the second quarter on account of firm global coal prices.
They said Chinese coal demand has grown, while domestic petcoke prices have risen by about 30 per cent QoQ in Q2 of FY17 due to commissioning of Reliance Industries' petcoke gassifiers.
However, brokerage Motilal Oswal Securities said unlike previous monsoon seasons, cement prices have been firm this time around, with all-India (ex-South) price realisation rising 2 per cent sequentially till August 2016.
"We expect further price hikes post monsoon, led by a pickup in construction activity across regions," the brokerage said.
ICICI Securities believes cement companies would be able to pass on the hike in input cost to consumers in the medium term. "Companies have announced price hikes of Rs 10-50 a bag across most regions in September, mainly on reversal of the price fall during monsoon. Any correction in stock prices on seasonal weakness would be an opportunity to buy these stocks," ICICI Securities said in a note.
The brokerage prefers UltraTech Cement, Shree Cement and Ramco Cements, other than Ambuja Cements and JK Lakshmi Cement.
Kotak Institutional Equities said its stock preference has been aligned to North India-based players such as JK Cement and JK Lakshmi Cement, given the rich valuations and risk to lofty earnings expectations for pan-India players.
 

Keywords: Money spinner

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