Shares of cement makers fell as the competition watchdog initiated an investigation against alleged anti-competitive behaviour.

The Competition Commission of India has initiated an investigation against ACC Ltd. and Ambuja Cements Ltd., the two companies said in their exchange filings. Both the Holcim group subsidiaries, however, said that they have acted in compliance with competition laws and are fully cooperating with the investigation and providing all necessary information to the authorities.

Reuters reported citing unnamed people that searches were also conducted at offices of UltraTech Cement Ltd. BloombergQuint awaits response to queries emailed to Atul Daga, chief financial officer at UltraTech.

Shares of UltraTech, ACC and Ambuja Cement fell 1.5-3%, while stocks of regional players including JK Cement Ltd. and JK Lakshmi Cement Ltd. declined more than 3-4%.

The investigation comes after Roads and Highways Minister Nitin Gadkari hinted at possible “cartelisation” and “black marketing technique” in the cement industry in September.

Morgan Stanley, quoting a Moneycontrol report, said the investigation following searches could act as a speed breaker for stock performance in the near term since the process could be laborious and time-consuming before any final judgment is reached.

According to Morgan Stanley, the development could delay potential cement price hike and any such delays would hurt pricing assumptions for FY22 because it would be difficult for companies to cover pricing in the following quarters in view of large new capacity additions and seasonality. It estimates an adverse impact of 5-15% on the operating income of cement makers in the next financial year.

This isn’t the first time that cement companies have been pulled up by CCI. In 2012, the competition watchdog had found 10 cement manufacturers guilty of cartelisation under Section 3 of the Competition Act that prohibits anti-competitive agreements. The regulator had examined data between January 2007 to March 2011.



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