SP Tulsian`s view on Ambuja Cement, ACC

Tulsian told CNBC-TV18, “It’s really very strange, if you see the upside or may be the price behaviour of cement stocks, Ultratech is ruling negative, Madras cement is ruling negative. India cement one can understand that there has been this short selling element or the short covering element lying into the counter because the shorts have been created in a huge way, but it is very strange to see ACC and Ambuja Cement.”

He further added, “Ambuja Cement has been into strong trading zone for last one week or so and its very strange to see share ruling at Rs 175 and when I was talking to one or two significant market players some of them have started saying that probably there may be a buzz of merger of Ambuja Cement with ACC. I don’t know how far one can really rely on this news. Whether this news originates only to justify the price rise or justify the corporate up moves into the stocks happening. But CCI penalty is definitely a hangover if we presume that 8% penalty is going to get levied, that can put a penalty of Rs 600 crore on each of the company that is ACC and Ambuja Cement. If you just want to take a ballpark of 8%, this penalty worls out to about Rs 240 per tonne of the capacity because none of the companies have created any significant capacity in last three years. So, definitely that takes away their 55-60% of the PAT of one year.”

“I don’t think that if that kind of order comes with a penalty of 8% market will really be kind with these stocks. But its really very strange to see the stocks moving up that to after 11 O’Clock. So, either the penalty must not be at 8%, it must be coming with a very lower penalty which was earlier expected, to the extent of may be 2-3% of the average annual turnover or may be some corporate actions are keeping ACC and Ambuja Cements to move in exception to the other cement stocks on which the penalty of about 8% is expected in case of 7-8 other large companies.”