Concrete gains

Dalmia Cement promoter entity cements holding as stock heads north

Puneet Dalmia is on a roll. The promoter and managing director of Dalmia Bharat has managed to embellish the company’s performance that has seen it emerge as the country’s fourth largest cement manufacturer.

Net sales have recorded a healthy CAGR of 24.5% between FY13 and FY17. After recording losses for two consecutive years (FY14 and FY15), Dalmia Bharat has witnessed a healthy rebound in its profit. For the just concluded fiscal, net profit saw a 1.3x increase to Rs. 345 crore. The company’s stellar performance was driven by improvement in operational efficiencies, manifested in a substantial improvement in the return on capital employed in FY16, at 10.56% after hovering around 4% for the previous two years. The company was also able to reduce its power consumption (increased usage of solar power) and freight costs by 23% and 3%, respectively, in FY17.

It's not surprising that the stock hit a 52-week high on May 15, at Rs. 2,625. Since the year began, the stock has gained 183% against 32% gain in the BSE Mid-Cap Index. Over the same period, promoter entity Himshikhar Investment acquired 0.73% stake in the company. Over 29 trading sessions, the entity bought 4.48 lakh shares worth Rs. 191.44 crore. The overall promoter holding currently stands at 58%.

Among institutional investors, foreign portfolio investors hold a substantial 8.04%, entirely led by Valiant Mauritius Partners Offshore. Domestic mutual funds own 4.14%, with Birla Sun Life Advantage Fund holding a significant 1.39%. Among other major players, KKR Mauritius Cement Investments sold off its entire stake of 8.43% (75 lakh shares) on April 21 after holding it for six and a half years.

The company has made a concerted effort to improve its brand value and mainstream the usage of cement as a commodity. It launched Dalmia DSP Cement in FY17, a super premium cement, which currently comprises 10% of retail sales, and Craft Béton, another limited edition platform for art pieces made of cement.

With the increased thrust on affordable housing and infrastructure development and the continuous transition towards higher value-add, Dalmia Cement is poised to witness robust growth in the coming quarters.