Cement major to cricket controller
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It's the second time in the last 12 months that shares of India Cements Ltd have taken a pounding on the bourses, triggered by events that are largely peripheral to the firm's core business of producing cement. Related: In cricket or business, man used to having his way
On June 8, last year, shares of the company tanked nearly 5 per cent in early trade on the BSE on reports that the CBI had summoned N Srinivasan, the company's vice chairman and managing director, for questioning in connection with YSR Congress chief Jaganmohan Reddy's disproportionate assets case.
While the company managed to weather the storm then, the effect of the firm's links to the Indian Premier League (IPL) spot-fixing and betting scandal has lead to the India Cements scrip taking yet another, and a more sustained, hammering.
As the owner of the Chennai Super Kings (CSK) franchise of the IPL, India Cements' fortune is inextricably linked to the cricket team, something that a substantial chunk of the company's shareholders are still unwilling to accept. Over the last week, India Cements lost a notional Rs 600 crore in market capitalisation as its shares dropped from Rs 87.40 on May 17, a day after Rajasthan Royals pacer S Sreesanth was arrested by the police, to Rs. 68.40 on May 23, when Srinivasan's son-in-law and CSK team principal, Gurunath Meiyappan's links to bookies began to surface.
Even though the stock snapped a seven-session losing streak on Tuesday, it's still way below its 52-week high of Rs 104.65 it clocked on October 15 last year. When India Cements had bought CSK for $91 million (around Rs 500 crore) in 2008, Srinivasan had tried to allay shareholder apprehension by claiming that the company's entry into cricket offered an opportunity for it to pump up its brand valuations. In a 2008 conference call with analysts, Srinivasan is reported to have said that India Cements' entry into IPL was far from an impulsive move and, instead, was "a very clear, analytical position with a view to solely building our brand more extensively..."