Shares of Shree Cement dropped as much as 10% on Monday after Income Tax officials surveyed the cement maker's premises.

The Shree Cement stock opened at ₹22,630 apiece on the National Stock Exchange (NSE) before hitting a low of ₹22,605. The cement producer's market capitalisation fell to ₹83,405 crore.

In a stock exchange filing on Saturday, Shree Cement said it has gathered that a lot of negative information about the company and its officials is floating in certain sections of the media in connection with the income tax survey.

"We would like to clarify that the survey is still going on. The entire management team of the company is available and extending full cooperation to the officials. Any information circulating in the media otherwise is incorrect and has been published without seeking prior inputs from the company," the cement maker said.

According to rating agency CRISIL, cement prices are expected to slip 1-3% this fiscal year after clocking a 4% compound annual growth rate (CAGR) over the past four years to a new all-time high of ₹391 per 50 kg bag last fiscal year. The run-up was due to disruptions caused by Covid-19, followed by a sharp surge in input costs, especially thermal coal, further aggravated by the Russia-Ukraine war.

To be sure, prices have moderated since early 2023 on the back of a gradual softening of energy costs and efforts of manufacturers to gain market share in a seasonally strong fourth quarter. Prices fell around 1% to ₹388 per bag on average in the fourth quarter of last fiscal sequentially, despite manufacturers carrying high-cost inventory. On an on-year basis, though, prices have remained elevated.

The heightened competitive intensity can be gauged from the fact that, for the first time in several years, there were no pre-monsoon price hikes in April and May this fiscal despite steady demand. The push to improve market share is evident from the top five players comprising 55% volume share last fiscal compared with 49% pre-Covid-19.

CRISIL expects cement demand growth to be strong at 8-10% on-year this fiscal, the pre-election year. This, however, will not propel prices up. "On the contrary, prices are set to decline around 2% year-on-year to ₹382-385 per bag, pulled lower also by relatively moderate growth in the trade segment," the rating agency says.

International petcokepet-coke have also eased beginning the second quarter of fiscal 2023, and declined around 13% year-on-year in the second half of fiscal 2023 in tandem with crude oil prices. Domestic petcoke prices have followed suit, too. Petcoke, a crude oil derivative and a key input in cement production, is expected to correct further, in line with crude oil prices that fell around 27% year-on-year between April and May and are expected to fall further as supply conditions improve, says CRISIL.

Shree Cement IT survey

Shree Cement shares drop 10% on IT raid