Shares of Sanghi Industries extended their downfall for the third straight session, plunging another 10 percent in early trade on January 18 amid persisting concerns over limited profitability on its cement supply agreement with parent Ambuja Cements.
At 9.33am, shares of Sanghi Industries were trading at Rs 121.40 on the NSE. Volumes in the counter were also sharply higher as 63 lakh shares changed hands so far, significantly more than the one-month daily traded average of 11 lakh shares.
Shares of the cement maker had fallen another 10 percent in the previous session as well.
Sanghi Industries has entered into a contract with Ambuja Cements to supply its entire production to Ambuja and ACC at a fixed 10 percent markup over the production cost. This decision is viewed as a potential constraint on Sanghi Industries' future profitability, as it means the company won't be able to secure a competitive market price for its cement output.
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"We believe that this will cap Sanghi's profitability substantially as entire production will be purchased at just a 10 percent markup to operating costs," said Mangesh Bhadang, equity analyst at Centrum Broking.
Ambuja Cements owns a 54.51 percent stake in Sanghi Industries which was acquired in August last year for a total enterprise value of Rs 5,000 crore.
The Adani Group owned Ambuja Cements also recently launched an open offer to acquire an additional 26 percent stake in Sanghi Industries. The open offer is scheduled to conclude on January 29.
Also Read | Sanghi Industries stock tumbles 10% as Ambuja Cement supply deal seen limiting profitability
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