Shares of cement maker Birla Corporation Ltd fell on Monday following a court ruling to dismiss its chairman. The stock slipped nearly 6% when trade opened Monday on the NSE at ₹676.75.
The Calcutta High Court on Friday barred Harsh Vardhan Lodha from holding any position in the MP Birla group companies with immediate effect. This means that he will not be the chairman of Birla Corporation Ltd. either.
Analysts say that while the order would be challenged, it creates uncertainty among investors about how the company is run. There are concerns that this could have an impact on the company’s expansion plans.
The company is looking to increase its capacity by 25% over the next 12 months. Currently, over 50% of the company’s volumes come from central India. Its 3.9 million tonnes per year (mtpa) plant at Yavatmal, Mukutban, is expected to come on stream by the June quarter of fiscal 22. Expansion of clinker capacity from 0.4 mtpa to Chanderia is expected to come on stream by March 2021. The company also plans to expand its Kundanganj crushing plant by 1.2 million tonnes, however, until demand uncertainty related to the changes comes into play. waiting to conserve cash.
Analysts said these capabilities would boost the company’s volume growth beyond 2022. However, a further delay in commissioning these capabilities due to management uncertainty could result in a loss of shares of market. In addition, it would keep the company’s debt high.