The stock of Dalmia Cement (Bharat), a diversified player, has sharply under-performed the broader market over the past three months. Investors are concerned about the bleak prospects of the company’s key businesses.
There are no signs of revival in the operating environment in the company’s key southern markets. Its sugar division is also hit due to falling sugar prices. The stock has declined nearly 5.3% during the said period as compared to the 11% increase in the Sensex. Cement companies operating in the South had reported a fall in their price realisations between 8 and 15% on a per tonne basis in the first quarter, due to rapidly expanding capacities and sluggish demand. Cement capacity in the southern region is expected to reach 120Mt by the end of March 2011, a rise of 20% within a year, even as demand in the region is dwindling. Analysts point to a significantly better sugar output this year. This is likely to keep sugar prices weak. In addition, concerns are also attributed to higher prices of sugarcane, the major input for the sugar sector.
Dalmia Cement (Bharat) had earlier announced plans to demerge its cement, and certain other businesses into Dalmia Bharat Enterprises (DBE), in a bid to create entities that are sharply focused.