Orient Cement zooms 21% in two days amid buzz of Adani Group eyeing stake

Meanwhile, BSE has sought clarification on an online article claiming that Adani Group was in talks to buy promoters’ stake in Orient Cement.

Shares of Orient Cement moved higher by 12 per cent to Rs 148.70 on the BSE in Wednesday’s intra-day trade on the back of heavy volumes in an otherwise weak market. In past two days, the stock of CK Birla Group cement & cement products company has rallied 21 per cent amid report of Adani Group in talks to buy promoter stake in the company.

Meanwhile, the BSE had sought clarification from Orient Cement on January 3, 2023, with reference to news appeared in www.tradingview.com dated January 3, 2023, quoting “Adani Group in talks to buy promoter stake In Orient Cement.”

With regards to the captioned news item, Orient Cement clarified that the company is not privy to any such discussion, and therefore cannot comment on the same.“We further wish to clarify that at present there is no material information/ announcement, including impending announcement, which in the opinion of the company may have a bearing on the price/ volume behaviour of the scrip,” Orient Cement said.

At 11:15 AM; Orient Cement traded 8 per cent higher at Rs 142.75, as compared to a 0.74 per cent decline in the S&P BSE Sensex. The trading volumes at the counter jumped over 15-times today. A combined 12.3 million shares representing 6 per cent of the total equity of Orient Cement changed hands on the NSE and BSE.

As on September 30, 2022, the promoters held 37.90 per cent stake in Orient Cement. Domestic institutional investors including mutual funds and insurance companies held 11.30 per cent holding, while foreign portfolio investors held 6.43 per cent stake in the company and retail investors’ shareholding stood at 22.24 per cent stake. Of these, Harimohan Bangur (1.59 per cent) and Rakesh Jhunjhunwala (1.22 per cent) held over 1 per cent stake in the company, the shareholding pattern data shows.

However, in past one year, Orient Cement has underperformed the market by falling 11 per cent, as compared to 2 per cent rise in the S&P BSE Sensex. The stock had hit a 52-week high of Rs 184 on February 7, 2022.

On November 29, 2022, CARE Ratings reaffirmed the ratings of Orient Cement’s bank loan facilities and instruments. The ratings continue to derive benefit from its experienced promoters and management along with being part of an established group, diversified regional presence and integrated operations with captive limestone mines and power plants, the rating agency said in rating rationale.

Further, the company has a healthy capital structure and debt coverage metrics. These strengths are partially tempered by Orient Cement’s moderate competitive positive in a highly organised and competitive industry, presence in the Southern India cement market which is characterised by overcapacity and its operating profitability being vulnerable to demand-supply dynamics as well as volatility in the input prices, it added.

The outlook has been revised from ‘Positive’ to ‘Stable’ majorly driven by increasing cost pressures, particularly, power & fuel costs faced by the industry with limited ability to fully pass on the same to the customers in an inflationary environment. Accordingly, the company’s operating profitability has significantly moderated in H1FY23 in comparison with FY21 and FY22 FY22 (refers to the period April 1 to March 31).

Although, the same may improve partially going forward, on an overall basis the profitability margins may remain below the earlier envisaged levels in FY23. Additionally, the company faced demand pressure, particularly from the southern region particularly due to extended rainfall observed in the current fiscal year i.e. FY22. Overall the volume of sales are also estimated to be lower than previous expectations. Consequently, the gross cash accrual (GCA) is estimated to moderate leading to lower flexibility in executing capital expenditure plans through internal accruals over the medium term, CARE Ratings said.

Source: Business Standard 

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