India Cements’ N Srinivasan defends cement price hike, ICL incurs loss in June quarter

CHENNAI: On a day his company posted a quarterly net loss, India Cements’ N Srinivasan broke his silence on allegations of a cement manufacturers cartel and said recent hikes in prices were only due to rising raw material costs.
Builders and developers in the south have been up in arms after cement makers raised prices recently. But the cement companies have been saying that a steep increase in input costs like coal, power and transportation crippled the cement industry where at least half of them were incurring heavy losses.

“We are not finding fault with the builders and their business. I’m just saying that they are diversifying attention from the fact,” Srinivasan, vice chairman and managing director of India Cements, said at the sidelines of a meeting to announce his company results.

India Cements posted a net loss of Rs 2.96 crore during the quarter ended June 30, 2014, as against a net profit of Rs 16.82 crore during the same period last year. The total income from operations has come down to Rs 1,228.41 crore from Rs 1,240.87 crore from the previous year.

“Raw material costs have gone up and this has an impact during the quarter,” said Srinivasan.

On allegations by builders, Srinivasan said only half a bag of cement is used per square feet. If one bag of cement costs Rs 360, it works out to only Rs 180 per square feet, pointed out. “The share of cement cost in a building is minimal. But builders are selling flats in the price range of Rs 5,000 to Rs 25,000 per square feet depending on the location.”

Rakesh Singh, president of marketing at India Cements said realty prices in prime locations in Chennai had doubled.“Hence there is no co-relation between cement price and apartment price. Percentage of cement component in apartment price is only between 1-5%.”

But Ajit Chordia, the president of the Chennai Chapter of the Confederation of Real Estate Developers Association of India said it was the sudden steep increase that builders were worried about. “I accept Mr Srinivasan’s argument. But we are talking about the sudden steep increase of cement price at a time when the market is reviving. We can’t pass on the burden to the customers.”

In June, builders threatened to stop construction work if cement companies did not roll back prices. “Can they protest against the increase in the price of sand or rolling steel, which are not in the organised sector?” asked Srinivasan. “We don’t expect them to intervene in our business. They must understand cement is a capital intensive industry in the core sector. It contributes a lot to the economy, income generation and employment creation.”