Why DCM Shriram Share Price is Falling

Indian share markets have been in an upward trend off late despite mixed global cues. With earnings season in full swing, benchmark indices have risen higher on the back of better than expected results.

The BSE Sensex has risen by 3.4% while the Nifty has risen by 3.9%.

However, despite the positive sentiment in the market, some stocks continue to fall. One such stock is DCM Shriram.

Let's find out why the company's shares are falling.

Rising raw material costs hurt profitability

DCM Shriram reported a marginal decline in revenue for the March 2023 quarter at Rs 28.9 bn.

Revenue in DCM's chloro-vinyl arm, which accounted for the largest share of its total revenue for six quarters, declined 21% YoY, falling to second place behind the sugar segment.

However, the sugar segment's revenue rose 28.3% YoY to Rs 10.7 bn on account of higher sugar and distillery volumes, along with higher prices.

The company classifies its business into four major segments - chloro vinyl (chlor alkali and plastic), sugar, agri, and bioseeds.

Despite the increase in revenue, the company's operating profit fell as total expenses rose 11.6% YoY due to higher raw material and power costs.

DCM also said it had a one-time negative impact of Rs 230 m on account of provision for electricity duty on auxiliary consumption in Rajasthan.

As a result, it reported a 53.5% YoY fall in its net profit. The company's consolidated net profit fell to Rs 1.87 billion compared to Rs 4.01 billion a year ago.

Management Commentary

According to the company, the chemical business (chloro vinyl) was down due to fall in demand owing to global recessionary trends and new capacity additions in India.

The vinyl business has been under pressure amid recession fears and weak demand from clients in the construction sector.

The company added that import of plastic continues to be high due to poor demand from construction sector in China, US, and Europe, with matters of anti-dumping duty and reduction in customs duty unaddressed by the government.

It said that it expects projects for the chemical business to be delayed by a quarter due to supply constraints.

How DCM Shriram shares have performed recently

DCM Shriram shares have declined by 3.8% in the last five days. Over the past six months, the company's shares have been trading lower by more than 22%.

The stock is down more than 30% in the last one year. However, it has risen over 180% in the past five years.

DCM Shriram touched its 52-week high of Rs 1,249 on 5 May 2022 while it touched a 52-week low of Rs 730 on 29 March 2023.

About DCM Shriram

DCM Shriram is engaged in the business of manufacturing fertilisers, chloro vinyl, cement, and chlor- alkali. The company is a part of the DCM group founded by Sir Shri Ram.

The DCM group is an industrial empire manufacturing a vast variety of goods such as textiles, sugar, chemicals, vanaspati, pottery, fans, sewing machines, electric motors, and capacitors.

DCM is currently the second largest manufacturer of caustic soda in the country with a competitive cost structure which places it well among its peers in the industry.

The company is expanding its capacities and is also setting up chorine and hydrogen downstream integration projects which will lend more stability to the operations.

To know more about the company, check out DCM Shriram company fact sheet and DCM Shriram quarterly results.

You can also compare DCM Shriram with its peers on our website.

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