India Cements' shareholders are paying a price for its vice-chairman and MD N Srinivasan's success in cricket, says a report in the Business Standard today.
The company failed to generate any shareholder value over the last four years, when Srinivasan climbed up the ladder in the business of cricket, the report says, quoting experts and analysing price movement of the India Cements stock.
In the last five years, the Sensex rose 14.47 percent and India Cements fell 53.33 percent.
The one figure that is worrying for analysts and shareholders is India Cements' Rs 2,372 crore outstanding advances to unlisted subsidiaries. In the four years' time, such loans have more than doubled, the report says.
The question is why this amount was not invested back into its business? What are these unlisted companies doing? Analysts are of the opinion that this could have been at least invested in financial assets, which could also have returned a decent amount, boosting shareholder wealth.
The company's return on equity at 7.5 percent is the lowest in the industry.
The outlook for the company is so negative that many brokerages have even stopped coverage of the stock, the report said. Most of the analysts quoted in the report do not expect a turnaround in the near future.
In contrast is the improvement in fortunes of the Board of Control for Cricket in India, of which Srinivasan is the head. According to the report, the board's net surplus surged 500 percent to about Rs 382 crore over the last two years.
India Cements may be Srinivasan's own. But as a listed company, it has a commitment to its shareholders. It is high time that shareholders throw a few unpleasant questions to the management.
An editorial in the Business Standard had earlier pointed out that the whole issue of IPL spot fixing is also bringing to the fore the shoddy corporate governance practice of Srinivasan and India Cements.
"The question should be asked: should someone with the approach to governance that Mr Srinivasan has demonstrated in this case be running a listed company?" the edit had asked.
No, he should not be running the company, if he is more interested in cricket.
India Cements used to be South India's largest cement company. The last few years have been a boom time for cement makers. Despite this, the company has been relegated to the third spot, the BS report says.
Isn't this proof enough that Srinivasan is more interested in cricket?
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Updated Date: Dec 20, 2014 21:18:58 IST