Barak Valley Cements Ltd Management Discussions

ECONOMIC OVERVIEW WORLD ECONOMY

The global economy remained resilient during FY 2025-26 despite heightened geopolitical tensions, persistent trade uncertainties, and varying monetary policy actions across major economies. While inflationary pressures moderated in several advanced economies, growth continued to be uneven due to supply chain disruptions, regional conflicts and volatile commodity prices.

The International Monetary Fund (IMF) projects global economic growth to remain moderate over the medium term. Emerging market economies, particularly India, continue to outperform most advanced economies, supported by strong domestic demand, improving investment activity and favourable demographic trends. However, risks arising from geopolitical developments, energy price volatility, global financial market uncertainty and protectionist trade policies continue to warrant close monitoring.

Overall, the global economic environment remains cautiously optimistic with improving macroeconomic stability, although downside risks persist.

INDIAN ECONOMY

India continued to maintain its position as one of the fastest-growing major economies during FY 2025-26, supported by resilient domestic consumption, sustained public capital expenditure, healthy corporate balance sheets and continued policy reforms.

Government initiatives aimed at infrastructure development, manufacturing, logistics, affordable housing, railways, roads, renewable energy and urban development have significantly strengthened investment activity. The continued emphasis on the "Viksit Bharat @2047" vision, coupled with Production Linked Incentive (PLI) schemes, Digital India initiatives and ease of doing business reforms, has further enhanced Indias long-term growth prospects.

Inflation remained within the Reserve Bank of Indias tolerance band for most part of the year, enabling relatively stable monetary conditions. Improved rural demand, steady urban consumption, robust tax collections and higher capital expenditure by both Central and State Governments continued to support economic momentum.

Indias strong macroeconomic fundamentals, healthy foreign exchange reserves, stable banking system and expanding manufacturing base continue to provide confidence for sustained long-term economic growth.

Indian Cement Overview:

The Indian cement industry continued to witness healthy demand during FY 2025-26, supported by increased investments in infrastructure, housing, commercial construction and industrial development. Government expenditure on highways, railways, airports, irrigation projects, urban infrastructure and affordable housing remained key demand drivers.

India continues to be the second-largest cement producer globally, with installed cement manufacturing capacity exceeding 650 million tonnes per annum. Industry participants continued to invest in capacity expansion, operational efficiencies, renewable energy, waste heat recovery systems and alternative fuels to improve competitiveness and sustainability.

The industry also witnessed increasing consolidation, enabling larger players to improve operational efficiencies and expand their geographical presence. Rising adoption of digital technologies, automation and green manufacturing practices continued to improve productivity and reduce operating costs.

Although fluctuations in fuel prices, logistics costs and raw material prices remained areas of concern, the long-term demand outlook for the cement industry continues to remain positive, supported by sustained infrastructure investments, rapid urbanisation and increasing housing demand.

Looking ahead, the long-term outlook for the Indian cement industry remains positive, supported by rapid urbanisation, increasing per capita cement consumption, government infrastructure investments, and initiatives such as the National Infrastructure Pipeline (NIP), PM Gati Shakti, Smart Cities Mission, and the Pradhan Mantri Awas Yojana (PMAY).

Fiscal Policy and Economic Development

Indias fiscal policy during FY 2025-26 remained focused on sustaining economic growth through enhanced public capital expenditure, fiscal prudence and structural reforms. Continued emphasis on infrastructure creation, manufacturing, logistics, affordable housing, renewable energy and digital transformation has strengthened the countrys long-term growth prospects while fostering private sector investment.

The Union Budget 2025-26 continued to prioritise capital expenditure with significant allocations towards roads, railways, ports, airports, urban infrastructure and rural development. Government initiatives such as PM Gati Shakti, Bharatmala, Sagarmala, Smart Cities Mission and Pradhan Mantri Awas Yojana continued to generate substantial demand for core sectors, including cement and construction materials.

Indias strong macroeconomic fundamentals, stable banking system, healthy foreign exchange reserves and sustained tax collections have further reinforced investor confidence. Continued policy reforms aimed at improving ease of doing business, attracting investments and strengthening manufacturing under the "Make in India" initiative are expected to support long-term industrial growth.

The Governments continued focus on infrastructure-led development is expected to remain a key driver of cement demand over the coming years, providing favourable growth opportunities for the Company and the industry as a whole.

International Comparisons and Global Position

India continues to strengthen its position as one of the worlds leading emerging economies and remains among the fastest-growing major economies. The countrys resilient domestic demand, expanding manufacturing capabilities, stable financial system and sustained infrastructure investments have enabled it to outperform several advanced and emerging economies amidst a challenging global environment.

Indias increasing integration with global supply chains, improving investment climate and emphasis on innovation and digital transformation have enhanced its competitiveness in the international market. Continued reforms aimed at improving productivity, ease of doing business and industrial development are expected to further strengthen Indias position as a preferred investment destination.

The countrys robust economic fundamentals, coupled with its long-term infrastructure development agenda and growing urbanisation, continue to provide a strong foundation for industrial growth. These structural advantages are expected to support sustained demand across core sectors, including cement, thereby creating long-term growth opportunities for the industry.

Y-o-Y Growth of Indian Economy

During FY2025-26, the Indian economy witnessed broad-based growth across key sectors, supported by sustained public infrastructure spending, resilient domestic consumption and improving private sector investments. Increased construction activity, expansion of manufacturing, growth in logistics and continued urbanisation contributed significantly to overall economic momentum.

The Governments continued emphasis on developing transport infrastructure, industrial corridors, housing projects and renewable energy facilities accelerated demand for construction materials. Simultaneously, improving rural incomes and higher public spending on social and physical infrastructure supported demand across both urban and semi-urban markets.

The banking and financial sectors remained well-capitalised, ensuring adequate credit availability for businesses and infrastructure projects. Continued adoption of digital technologies, formalisation of the economy and policy reforms further enhanced operational efficiency and improved the overall investment climate.

These developments created a favourable business environment for the cement industry, reinforcing long-term demand prospects and providing opportunities for sustainable growth.

CEMENT INDUSTRY OF NORTH EAST REGION

The North-Eastern region of India continues to offer significant growth opportunities for the cement industry, driven by increasing investments in infrastructure, urban development, affordable housing and industrial projects. The Governments continued focus on improving regional connectivity through roadways, railways, bridges, airports and border infrastructure has resulted in sustained demand for cement across the region.

The implementation of various Central and State Government development initiatives, coupled with increasing urbanisation and rising demand for quality housing, is expected to support long-term growth in cement consumption. Additionally, the regions strategic importance under the Governments Act East Policy is likely to further accelerate infrastructure development and industrial activities.

Despite logistical challenges, difficult terrain and seasonal disruptions, the North-East remains an attractive market due to relatively lower per capita cement consumption compared to the national average, indicating considerable headroom for future growth.

Opportunities

Indias continued emphasis on infrastructure development, affordable housing, urbanisation and industrial expansion presents significant growth opportunities for the cement industry. Government initiatives such as PM Gati Shakti, Bharatmala Pariyojana, Pradhan Mantri Awas Yojana (PMAY) and various state-sponsored infrastructure projects are expected to drive sustained demand for cement in the coming years.

The North-Eastern region, where the Company has established a strong market presence, continues to witness increasing public and private investments in roads, bridges, railways, airports and urban infrastructure. These developments, coupled with rising housing demand and improving regional connectivity, are expected to support long-term growth in cement consumption.

The Companys established "Valley Strong" brand, strategically located manufacturing facilities and well-developed distribution network position it favourably to capitalise on these opportunities. The proposed capacity expansion and continued focus on operational efficiency are expected to further strengthen the Companys competitive position and enhance its ability to meet growing market demand.

Threats

The cement industry remains exposed to various external factors, including fluctuations in fuel and power costs, volatility in raw material prices, increasing logistics and freight expenses, intense market competition and changes in government policies and regulations. Seasonal factors, adverse weather conditions and disruptions in the supply chain may also impact production and dispatches, particularly in the North-Eastern region.

Further, any slowdown in infrastructure spending, delays in execution of construction projects, or weakening of economic activity may adversely affect cement demand and the Companys operating performance.

Risks and Concerns

The Company has established a comprehensive risk management framework to identify, assess, monitor and mitigate key business risks. Risks relating to operations, finance, procurement, compliance, safety, environment and information technology are periodically reviewed by the management and the Risk Management Committee, which reports significant matters to the Board of Directors.

The Company continues to focus on improving operational efficiencies, optimising procurement and logistics, strengthening cost management initiatives, ensuring regulatory compliance and maintaining robust internal controls. Continuous monitoring of market developments, prudent financial management and timely strategic interventions enable the Company to effectively respond to changing business conditions and minimise the impact of potential risks.

The Company remains committed to sustainable growth by adopting appropriate risk mitigation measures while pursuing long-term value creation for all its stakeholders.

Risk Management

We face both internal and external uncertainties that influence the formulation of our Risk Management Policy. Stringent compliance systems are effective in handling internal risks, while external risks are contingent on several uncontrollable factors. A robust risk management approach enables the anticipation and proactive mitigation of emerging risks. Our dedicated Risk Management Committee actively evaluates the day-to-day risks faced by the Company and ensures timely mitigation measures are implemented.

I. OUTLOOK

We generate value by expanding our capacity, embracing technological innovation, and adopting sustainable manufacturing practices. Our strategically located plants across south, central, and eastern India help optimize costs and facilitate our expansion into new geographies. Our resolve to increasing the share of green cement in our portfolio is indicative of our dedication to minimizing our environmental impact through technological advancements. The unwavering trust demonstrated by our stakeholders has established us as a preferred brand among customers, suppliers, contractors, and the communities in which we operate. This trust is a catalyst for our sustainable growth. Looking forward, the Indian cement industry holds substantial potential for sustainable development. SGC is poised to capitalize on these opportunities by focusing on capacity building, maintaining an emphasis on quality and innovation, and aspiring to secure a larger market share in north India while retaining our current leadership position. We are strongly optimistic about a future in which we strategically leverage the growing demand for cement in southern, eastern and central India.

II. FINANCIAL PERFORMANCE

The following are the highlights of the performance of the Company (Standalone):

During the year under report, your Company has earned a profit of Rs. 495.72 Lakhs in comparison to net profit of Rs. 807.18 Lakhs in the previous year.

SALES & MARKETING

Your Company has a diversified customer base in Mizoram, Manipur, Barak Valley Region and Tripura consisting of potential customers, contractors, builders, institutions, Government Agencies. Your Companys brand "Valley Strong" is a brand of trust and reliance for the people of North East since inception and therefore the entire production of the Company is sold in North East Region. During the year, the Gross Revenue from operations (before discounts and sales incentives) were Rs. 23,488.55 Lakhs in comparison of previous year Rs. 22,571.88 Lakhs. Your Company had also incurred Rs. 166.26 Lakhs in the year 2025-26 as compared to Rs. 358.45 Lakhs in the year 2024-25 on the Advertisement, Publicity & Sales Promotion expenses.

COSTS

(a) Raw Material

(i) Lime Stone:

The Company consumed 2,34,941.60 MT of Limestone during FY 2025-26, compared with 2,17,541.62 MT in the previous year, representing an increase of approximately 8.0%. During FY 2025-26, the average acquisition cost of Limestone also increased marginally to Rs.1,178.76 per MT, compared with Rs.1,144.99 per MT in the corresponding previous year, an increase of approximately 3.0%

(ii) Fly Ash:

During FY 2025-26, the Company consumed 73,030.92 MT of Fly Ash, compared with 79,590.81 MT in the previous year, representing a decrease of approximately 8.24% due to use of more other additives. The average consumption cost of Fly Ash also decreased to Rs.2,275.04 per MT during the current year, compared with Rs.2,442.71 per MT in the previous year, reflecting a reduction of Rs.167.67 per MT . Consequently, the total cost of Fly Ash consumed during FY 2025-26 stood at Rs.1,661.48 lakhs, as against Rs.1,944.17 lakhs in FY 2024-25.

(iii) Packing bags:

During FY 2025-26, the Company consumed 63.83 lakh packing bags at an average acquisition cost of Rs.11.47 per bag, compared with 62.40 lakh packing bags at an average acquisition cost of Rs.11.23 per bag during FY 2024-25. The consumption of packing bags increased by 1.43 lakh bags (approximately 2.29%), while the average acquisition cost increased by Rs.0.24 per bag (approximately 2.14%). The increase in the acquisition cost of packing bags was primarily attributable to the prevailing global crisis and its impact on input and supply-chain costs.

(b) Salaries, Wages and Labor Cost

During FY 2025-26, the Company incurred Rs.2,168.25 lakhs towards Employee benefit expenses in form of salaries, wages and labour costs, as compared to Rs.1,891.00 lakhs in FY 2024-25, representing an increase of Rs.277.25 lakhs (approximately 14.66%). The increase was primarily attributable to an additional provision of ^111.51 lakhs towards additional Gratuity and Earned Leave liabilities during the year, arising from the revision in the applicable terms under the New Labour Codes implemented during the year.

(c) Transportation Cost

During FY 2025-26, the Company dispatched 3,16,192.00 MT of cement, as compared to 3,08,878.00 MT in FY 2024-25, representing an increase of 7,314.00 MT . The increase in cement dispatches, coupled with the hike in freight rates, resulted in an increase in the overall transportation cost to Rs.801.45 lakhs during FY 2025-26, as against Rs.600.02 lakhs in the previous year, reflecting an increase of Rs.201.43 lakhs (approximately 33.57%).

(d) Financial Costs

During FY 2025-26, the Company incurred Rs.421.59 lakhs towards Interest and Financial Costs, as compared to Rs.555.62 lakhs in FY 2024-25, representing a decrease of Rs.134.03 lakhs (approximately 24.12%). The reduction in financial costs was primarily attributable to the substantial repayment of secured and unsecured borrowings during the year, resulting in a lower interest burden on the Company.

III. DISCLOSURE OF ACCOUNTING TREATMENT:

The Company adheres to the prescribed Accounting Standards for the purpose of preparation of Financial Statements. The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 under the provisions of the Act and subsequent amendments thereof.

The financial statements are prepared on a going concern basis and are presented in Indian Rupees and all values are rounded off to the nearest Lakhs except when otherwise indicated. The financial statements have been prepared under the historical cost basis except for certain financial assets and liabilities that have been measured at fair value.

IV. CREDIT RATING

The Company has obtained credit rating from CRISIL Ratings Limited- Crisil BB /Stable (Issuer Not Cooperating*; Migrated from ‘Crisil BBB-/Stable)

V. INTERNAL CONTROL SYSTEM & THEIR ADEQUACY

The Board of Directors are satisfied with the adequacy of the internal control system currently in force in all our major areas of operations, supported by SAP software and Compliance Management Systems. The Audit Committee assists the Board of Directors in monitoring the integrity of the financial statements, reservations, if any, expressed by our auditors including, the financial cost. Our internal controls are adequate and effective.

VI. STATEMENT OF KEY FINANCIAL RATIOS

The reasons for significant changes (i.e., change of 25% or More) in above key financial ratios are as follows:

• Operating Profit/ Net Profit margin Ratio

The net profit margin has declined due to increased raw material costs, higher outward transportation cost, Administrative overheads and stagnant revenue from operations during the year.

• Return on Net Worth (%)

The Return on Net worth ratio declined during the year due to a decrease in profit margins.

VII. CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic supply and demand conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.