Why Shree Cement Share Price is Falling

Benchmark equity indices Sensex and Nifty have been trading on a mixed note over the last month amid weak trends in global markets.

Global markets exhibited a negative bias as concerns regarding economic growth emerged in light of the political instability in Russia.

This instability led to an increase in oil prices, driven by worries over potential supply disruptions, given Russia's status as one of the largest oil producers.

Amid this volatility, shares of Shree Cement saw their biggest single day drop in the last three years. The stock has already been under pressure since the beginning of the year.

So, what led to a sudden decline in its share price?

Let's find out.

Tax evasion allegations send shares in a downward spiral

Shares of the company have tanked over 8% in the last five days amid media reports that the company has been found to have allegedly evaded Rs 230 bn in taxes.

The income tax department, last week, initiated a survey action at five locations of Shree Cement.

The raids took place at the company's bases in Beawar, Jaipur, Chittorgarh, and Ajmer. This came after the IT department officials doubted the tax deduction claims of the group. The scrutiny of the documents revealed that the company siphoned off Rs 12-14 bn every year in taxes.

The IT officials found huge irregularities in the accounts of coal purchased for cement production and the payment made. It was also reported that the sarpanch, gram panchayat, and the local bodies made "fake agreements", incurring further losses to the central and state governments.

Clarification by the company

The cement company in its press release clarified the income tax surveys, saying that the entire management team of the company is extending full cooperation to the officials and that any information circulating in the media otherwise is incorrect.

Here's what the management said...

• We would like to clarify that the survey is still going on. The entire management team of the company is available and extending full cooperation to the officials.
  
  Any information circulating in the media otherwise is incorrect and has been published without seeking prior input from the company.

Q4 Results

For the March 2023 quarter, Shree Cement reported a 17% YoY increase in sales at Rs 48 bn.

However, on the operating front, the company registered a marginal decline in operating profit at Rs 8.9 bn. Its operating profit stood at Rs 9.1 bn in the year ago quarter.

Consequently, the company reported a 15% YoY drop in net profit at Rs 5.5 bn compared with Rs 6.5 bn in the same quarter last year.

Yet, the near term outlook for the company seems positive on the back of several government initiatives. Cement production in India is estimated to grow by around 6-8% over fiscal years 2023 and 2024, following a 21% jump for the fiscal year ended March 2022.

Infrastructure-led investments, mass residential projects and broad-based economic growth are expected to keep cement demand solid.

A growing housing sector, which typically accounts for 60-65% of India's cement consumption, is also expected to remain a key demand driver. Also, continued large investments in roads and infrastructure projects will fuel cement demand.

How Shree Cement shares have performed recently

Shree Cement shares have fallen by more than 8% in the last five days. Over the past month, the company's shares have declined by more than 6%.

However, the stock is up 24.3% in the past year.

Shree Cement touched its 52-week high of Rs 27,013 on 22 February 2023 while it touched a 52-week low of Rs 18,560 on 24 June 2022.

About Shree Cement

Shree Cement is one of India's top cement makers. It was incorporated in the year 1979. The company's manufacturing operations are spread over north and east India across six states.

It has a consolidated cement production capacity of 44.4 million tonnes per annum (MTPA) and a power generation capacity of 742 MW. They have three brands under their portfolio, namely Shree Ultra Jung Rodhak Cement, Bangur Cement, and Rockstrong Cement.

Their manufacturing units are located at Beawar, Ras, Khushkhera Suratgarh and Jobner (Jaipur) in Rajasthan, Laksar (Roorkee) in Uttarakhand, Aurangabad in Bihar, Panipat in Haryana, Baloda Bazar in Chhattisgarh, and Bulandshahr in Uttar Pradesh.

For more details about the company, you can have a look at Shree Cement's factsheet and quarterly results on our website.

For a sector overview, read our cement sector report.

You can also compare Shree Cement with its peers.

Shree Cement vs Ambuja Cement

Shree Cement vs ACC

Shree Cement vs Ultratech Cement

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