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Another case of "diworsification" by a company

Another case of "diworsification" by a company that seems to be incapacitated to generate returns from the excess cash in its balance sheet and does not wish to return the same to the shareholders. Madras Cements’ decision to venture into sugar manufacturing business at a total investment of approximately Rs 4.5 bn seems to have no logic other than the temporary reversal in sugar cycle. Further, the improved sugar realisations would be offset by higher cane prices. Such instance of companies diversifying into unrelated businesses despite lack of expertise and insufficient rationale is a case of disregard to the rights of minority shareholders.

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