CCI's order may aid further consolidation in cement industry: Fitch

25 Jun 2012

1

The penalty imposed by the Competition Commission of India (CCI) on 11 cement companies on 21 June 2012 for coordinated supplier action, may aid the process of further consolidation in the industry over the long term, says a new report by Fitch ratings.

The cement industry in India is unique, with 57 per cent of the capacity being consolidated with the top eight players. The rest of the industry is highly fragmented, with small- to medium-sized companies mostly with uneconomical size of operations.

To the extent regulatory intervention limits coordinated supplier actions with respect to price and quantity, smaller firms (single or multiple plants with high geographic concentration) with uneconomic cost structures would become uncompetitive and face very significant deterioration in their credit profiles, Fitch says.

As such the fragmentation level in the industry is expected to reduce and larger and vertically integrated companies are likely to gain market share.

While the impacted companies are considering approaching Competition Appellate Tribunal against the order, in the event the fine is imposed, the amount of penalty to be paid by the companies as a percentage of their year-end (FY12) EBITDA is significant and ranges between 5 per cent to 64 per cent.

"The impact on credit profiles of most of these entities is likely to be minimal given their relatively low financial leverage (net debt/EBITA), except for Century Textiles and Industries Limited and Jai Prakash Associates)," the rating agency said in a statement.

Business History Videos

History of hovercraft Part 3 | Industry study | Business History

History of hovercraft Part 3...

Today I shall talk a bit more about the military plans for ...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of hovercraft Part 2 | Industry study | Business History

History of hovercraft Part 2...

In this episode of our history of hovercraft, we shall exam...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of Hovercraft Part 1 | Industry study | Business History

History of Hovercraft Part 1...

If you’ve been a James Bond movie fan, you may recall seein...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of Trams in India | Industry study | Business History

History of Trams in India | ...

The video I am presenting to you is based on a script writt...

By Aniket Gupta | Presenter: Sheetal Gaikwad

view more
View details about the software product Informachine News Trackers