Orient Cement up 21% in 2 days; firm clarifies on Adani stake purchase buzz

The BSE had sought clarification from Orient Cement on January 3, 2023, regarding reports stating that Adani Group was in talks to buy promoter stake In the company

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 the past two days, the stock of CK Birla Group cement & cement products company has rallied 21 per cent amid report of Adani Group eyeing promoter stake in the company.

The company, on its part, however, has clarified that it 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.

The BSE had sought clarification from Orient Cement on January 3, 2023, with reference to reports which said that Adani Group was in talks to buy promoter stake In Orient Cement.

At 11:15 AM; Orient Cement traded 8 per cent higher at Rs 142.75, as compared to 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 total equity of Orient Cement, had changed hands on the NSE and BSE till the time of writing of this report.

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.

In the 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 had 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 its rating rationale.

"Further, the company has 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 Southern India cement market which is characterised with overcapacity and its operating profitability being vulnerable to demand-supply dynamics as well volatility in the input prices," it added.

The outlook, however, has been revised from 'Positive' to 'Stable' majorly driven by increasing cost pressures, particularly, power & fuel cost faced by industry with limited ability to fully pass on the same to the customers in 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 overall basis the profitability margins may remain below the earlier envisaged levels in FY23. Additionally, the company faced demand pressure particularly from southern region particularly due to extended rainfall observed in current fiscal year i.e. FY22. Overall the volume sales are also estimated to be lower than previous expectation. 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.