Cement cos won't hike prices for a year
After several days of bickering, the Government and the cement companies finally agreed to a compromise that doesn't pinch either of them much. Notwithstanding the threat of an export ban from Commerce Minister Kamal Nath, cement companies refused to rollback the post-budget hike in cement prices. However, as a middle path to the standoff, cement makers pledged to freeze cement prices for a year. They will not hike prices even in the event of a rise in input costs, Nath said after a meeting with the Cement Manufacturers' Association (CMA). At the same time, cement companies will pass on the benefits of any tax relief from the Government to the consumers. So far, the Government has not given any assurances on reversing the hike in excise duty announced in the budget. It may be recalled that in his budget speech, Finance Minister P. Chidambaram increased the excise duty on cement sold at Rs190 or higher for a 50-kg bag. For cement bags sold at under Rs190 he slashed the excise levy. The very next day, cement makers jacked up prices by Rs12 per bag to nullify the effect of the higher excise duty. The price hike didn't go down well with the Government, which asked cement companies to reverse the move. The cement firms refused to budge, prompting Government to warn of a possible ban on exports to meet the shortfall in local supply. The real losers will be the investors, who had put money in cement shares amid a rosy outlook for the sector. Cement stocks have lost heavily and continue to bleed in the aftermath of the budget and the ensuing the feud between the Government and the cement companies.
Reliance to merge with IPCL
The Boards of Directors of Reliance Industries Ltd. (RIL) and Indian Petrochemicals Corp. Ltd. (IPCL) will meet on March 10 (Saturday), to consider a proposal to merge the two companies. The Boards of the two companies will also discuss and declare an interim dividend for the year ending on March 31. In May 2002, RIL won the bid to acquire a 26% stake in IPCL at Rs231 a share for Rs14.91bn. RIL's bid was way ahead of the other two bids. While public sector oil major Indian Oil Corp. Ltd. (IOC) bid Rs128 a share, Nirma offered Rs110 a share. RIL went on to buy an additional 20% stake in IPCL through the mandatory open offer. At present, the promoters' stake in IPCL stands at 46.68%. Foreign Institutional Investors (FIIs) own 12.5%, Insurance Companies 8.8%, MFs/UTI 3.4% and FIs/Banks hold 2.4%. The Government has a miniscule 0.35% stake in IPCL. It sold the residual stake in 2004 in the market. The merger has been in the works and has been anticipated for quite a while given the potential synergies. Several other small petrochemical companies had been merged into IPCL and the RIL-IPCL merger was a foregone conclusion. In fact, the two companies have already integrated quite a few aspects of their business. RIL supplies raw materials such as naphtha to IPCL and could supply gas, going forward. The share swap ratio is expected to be between 5:1 or 6:1 in favour of RIL shareholders. Shares of IPCL surged after the announcement.