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The Competition Commission of India (CCI) has fined 11 Indian cement companies in a price collusion investigation. The ruling, handed down after markets closed, has led to a sharp fall in share prices of these 11 companies.
UltraTech Cement, part of the diversified Aditya Birla Group, Holcim-controlled ACC and Ambuja Cement, India Cements and the Indian unit of France's Lafarge SA were among those fined the equivalent of 50 percent of their net profit for the fiscal years ending in March 2010 and March 2011.
Here are the top 10 facts on the development.
1) Cement stocks were the top losers on the back of the stiff penalty imposed by the Competition Commission of India. JP Associates (-3.35%), ACC (-3%), Grasim Industries (-2.8%), and Ambuja Cements (-2.7%) were the top four losers on the Nifty index. ACC and Ambuja, along with rivals Jaiprakash Associates and UltraTech account for around 50% of the cement produced in India.
2) Executives from the fined companies denied price fixing. "We have not indulged in any cartelisation," said O. P. Puranmalka, who heads UltraTech's cement business, adding the company will challenge the order.
3) Analysts have turned negative on the cement sector post the penalty. "We are already 'underperform' on the sector and are building in a 15 percent [net present value] discount in our calculation factoring CCI verdict," said Rakesh Arora, analyst at Macquarie Equities Research in Mumbai.
4) These 11 companies will have to pay in excess of Rs 6,000 crore in penalties. Analysts said the ruling, which was heavier than expected, reflected an increasingly tough approach by the three-year-old regulator and represented a coming of age for Asia's third-largest economy, hit by a spate of high-profile corruption cases in recent years.
5) These cement manufacturers had been directed to deposit the penalty amount within 90 days.
7) The Commission has also imposed penalty on the Cement Manufacturers Association. It has been asked to disengage and disassociate itself from collecting wholesale and retail prices through the member cement companies and also from circulating the details on production and dispatches of cement companies to its members.
8) The Commission has found that the cement companies have not utilised the available capacity so as to reduce supplies and raise prices in times of higher demand.
9) The Commission has also observed that the act of these Cement Companies in limiting and controlling supplies in the market and determining prices through an anti-competitive agreement is not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in construction and infrastructure industry vital for economic development of the country.
(With inputs from Reuters)