It's been a turbulent time for 68-year-old Narayanaswami Srinivasan. Within days of him stepping aside as president of the Board of Control for Cricket in India, following the arrest of his son-in-law over links with bookies, came the news that he was being probed for a controversial deal with Andhra Pradesh politician Jagan Mohan Reddy, now in jail.
The market has also been giving India Cements the jitters - the stock has shed a fifth of its value since the IPL controversy broke out. Analysts have been worried if its IPL team Chennai Super Kings, now also carrying a taint, is eating into India Cements' operating margins (up to 2 percentage points, according to a Mumbai-based analyst who didn't wish to be identified).
Srinivasan, not betraying any of those anxieties, told local media on Thursday that he's open to unlocking value in non-core investments, including Chennai Super Kings and Trinetra Cement. "Analysts have been saying that we are into too many things and need to unlock value. We have to see how best we can do that," he said. More clarity is expected after the first quarter. The India Cements vice-chairman and managing director was in familiar settings on Thursday. Appearing in his traditional dark-blue suit, Srinivasan chose to focus exclusively on the cement business and refused to take questions on cricket saying he was on leave from the cricket board.
"After 12 days of media bashing, it is business as usual for me at India Cements," a cool and confident Srinivasan said at the interaction where video cameras weren't allowed. "Of course, these events have taken a toll on market perceptions and valuations. But these are short-term." On Thursday, a day after the company reassured analysts, India Cements shares rose 3.75% to Rs 67.85. It isn't that the cement story has been rosy for Srinivasan. His company, South India's biggest cement maker, has posted four consecutive quarters of profit decline due to subdued demand on account of excess capacity. But the cement story has been less controversial, though the news of the Jagan probe threatens to spoil it.
Srinivasan, however, denied any wrongdoing in his investment in and the subsequent sale of his stake in Bharathi Cements, owned by Jagan Mohan Reddy, son of the late Andhra chief minister YS Rajasekhara Reddy. In doing so, Srinivasan repeated what he had told analysts on Wednesday. India Cements had bought a minority stake in Bharathi Cements for Rs 93 crore in 2009 and eventually exited it in 2010, making a profit of 0.35 billion in the process.
India Cements had bought a minority stake in Bharathi Cements for Rs 0.93 billion in 2009 and eventually exited it in 2010, making a profit of 0.35 billion in the process.
"It is prudent for any cement company to look at investments in Andhra Pradesh, which has a quarter of the country's limestone reserves," Srinivasan said. "Our initial plan was to boost investments as we progressed. But the foreign company offered a price which we could not afford, so we decided to exit."
The Central Bureau of Investigation is probing allegations that the investments were made as a quid pro quo for getting water from the Krishna river for Srinivasan's factories in Andhra. Srinivasan denied the allegations and said his plants were getting water even when Jagan Reddy's father was in power between 2004 and 2009.