Moody's says CCI ruling to hurt Holcim & Lafarge

Moody's has said the Competition Commission of India's (CCI) decision to impose a penalty on 11 cement producers is 'credit negative' for global cement majors Holcim and Lafarge both of which have Indian interests that have been fined.

The agency said that the indirect consequences of the CCI decision is more harmful than the cash-outflow due to the penalty.

"We believe that indirect credit consequences from the decision will outweigh the cash effect of the fines on Holcim and Lafarge," the agency said.

"Both issuers currently enjoy above-average operating margins in India, but the CCI ruling and increased scrutiny of cement prices are likely to make it difficult for Holcim and Lafarge to raise prices and maintain current margins."

Last week, the CCI imposed a penalty on cement companies based on their profits, as it ruled that 11 producers were indulging in cartel practices to keep cement prices high. (Source: Financial Express)