HeidelbergCement India Ltd Management Discussions

Global & Indian Economy at a glance

Particulars	2017	2018	2019	2020	2021	2022	2023	2024	2025	2026	2027
										Est.	Est.
A. World Output / Real GDP
(Annual percent change)
World	3.84	3.64	2.95	-2.70	6.63	3.77	3.32	3.42	3.44	3.06	3.22
- Advanced Economies	2.61	2.31	1.86	-3.96	6.16	3.06	1.70	1.86	1.95	1.78	1.70
- Emerging Market &	4.79	4.64	3.77	-1.82	7.04	4.28	4.44	4.47	4.42	3.87	4.17
Developing Economies
India	6.80	6.45	3.87	-5.78	9.69	7.61	7.21	7.10	7.62	6.48	6.53
B. In ation: Consumer Prices
(Annual Percent change)
World	3.35	3.59	3.90	2.98	6.28	8.876	6.14	5.04	4.03	4.37	3.45
- Advanced Economies	1.69	1.64	1.55	0.55	5.25	7.32	3.12	2.46	2.49	2.80	2.17
- Emerging Market &	4.65	5.09	5.68	4.79	7.04	10.01	8.27	6.79	5.04	5.39	4.26
Developing Economies
India	4.60	2.45	6.69	4.87	6.34	6.20	5.05	3.71	3.28	4.74	4.00
C. Current Account Balances
(Percent of GDP)
- Advanced Economies	0.99	0.79	0.72	0.26	0.74	-0.47	-0.03	0.07	0.07	-0.12	-0.07
- Emerging Market and	-0.07	-0.13	0.04	0.44	0.93	1.58	0.65	0.91	1.23	1.01	0.83
Developing Economies
India	-1.87	-2.16	-0.884	0.92	-1.254	-2.06	-0.74	-0.61	-0.92	-2.03	-1.65
D. World Trade Volume	5.39	3.99	1.16	-8.32	10.75	5.92	0.92	3.71	5.10	2.75	3.77
(Annual percent change)
E. Commodity Price Index
(Index)
- Oil (Base =100 in 2016)	122.5	158.5	142.1	96.6	160.2	222.9	186.5	183.2	156.8	190.6	176.4
- Non-fuel (Primary Commodities)
(Base =100 in 2016)	106.4	107.8	108.6	115.7	146.6	158.1	149.2	154.7	169.6	206.4	210.4

A. Global Economy

The global economy has been resilient ever since the wars started in Feb 2022. Geopolitical and trade-policy uncertainty continued to affect energy markets and supply chains. However, the grflowth in economy is perceptible despite these uncertainties. The ramifications of these conflicts have been far-fetched with main supply lines of fuel, and world trade taking a major hit. The impact on environment, loss of lives, construction waste are yet to be assessed. Ever since the wars started in 2022, the global economy GDP grflowth rate has not been able to breach into 4% grflowth rate bracket. Coupled with US Tariffs moves there has been a substantial loss of markets for export-oriented economies.

Agrarian economies are facing shortage of water due to climatic changes, fertilizers, and fuel due to the continuing war, whereas industrialized ones are facing shortage of markets, labour, investments and government reforms. In the fourth quarter of 2025, the world GDP grflowth was estimated at 3.9%. It significantly dropped after the war. The prolonged closure of Straits of Hormuz, US Tariffs, sanctions on Russia and Iran have put pressures on supply chains, oil prices, and coal. Therefore, only a marginal global increase in output is expected given the recently announced world-wide austerity measures.

The area wise economic scenario reveals that the Emerging and Developing Asia leads in inflation adjusted grflowth as in past. Areas such as Latin America, Caribbean, Middle East & Central Asia, G 7, and Sub-Saharan Africa are facing inflation higher than their GDP grflowth, thus negating real gains.

World Area	GDP Projections (%)		In ation Projections (%)
	2026 e	2027 e	2026 e	2027 e
Emerging and Developing Asia	4.93	4.78	2.70	2.50
European Union	1.34	1.41	3.13	2.12
G 7	1.60	1.57	2.81	2.23
Latin America and Caribbean	2.34	2.69	6.56	4.16
Middle East and Central Asia	1.91	4.59	11.19	8.14
Sub Saharan Africa	4.32	4.44	9.60	8.08

B. INDIAN ECONOMY

Amidst the prolonged geo-political tensions, India yet again delivered a strong grflowth trajectory in FY 26 of 7.6% GDP the Second Advance Estimates (SAE) for FY26 based on new base year of 2022-23 compared with FY 25 grflowth rate of 7.1%. Grflowth has primarily been led by services followed by industry with improved capital expenditure, high capacity-utilization and good monsoon. Share of services sector in the Indian economy has increased to 54.4% to 56.4%, industry including Manufacturing, Mining, Utilities, and Construction is around 26% to 28%, and agriculture is around 16% to 18%. Private consumption is the main Power-house of Indian economy touching 61.5% of the GDP. Exports remained stable at 21% of GDP.

The present Financial year comes with challenges. The continuing wars, tariffs have put pressure on the supply chains and energy prices. The austerity measures announced by the government to conserve foreign exchange are the need of the hour.

Consumer Price Index has been estimated 4.74% in 2026. It is attributed to tighter monetary policy, a good monsoon and structural changes. For the last 2 years the CPI has fallen, indicating a disinflation which bodes well for the common man. The predictions for FY 27 are in the vicinity of 4% largely attributed to fuel prices. Cement is expected to follow the last 3 years average grflowth rate of 8%.

C. INDIAN CEMENT INDUSTRY

C.1. CAPACITY AND DEMAND

Installed cement capacity in India in FY 26 was around approximately 720 Mn T and the production was around 492 Mn T yielding a capacity utilization of around 70%. The production grflowth was 8.7% in FY26. Per capita consumption of cement is steadily increasing but is lagging behind the w o r l d a v e r a g e o f 550 kgs, indicating a huge o p p o r t u n i t y f o r infrastructure grflowth in coming years.

C.2. INPUT COSTS

With the ongoing conflict in West Asia, fuel prices have increased significantly, and availability has become constrained due to shutdowns of major refineries disruptions in maritime logistics resulting from stranded vessels. Local refineries have curtailed production flowing to crude oil shortages and unfavorable economics, leading to a sharp escalation in pet coke prices. To mitigate the impact and control variable costs, we have maximized the usage of locally available coal, which remains competitively priced, by optimizing the fuel mix.

Diesel and lubricants have also witnessed substantial price increases. Limited availability and supply rationing have placed pressure on transporters, who have sought freight rate revisions. However, we have been able to manage the situation without any major cost escalation so far.

A significant challenge has been in the procurement of sweetener, where our requirement of approximately 50 KT per month is being maintained at existing prices despite repeated requests from suppliers for price increases.

The packaging industry has also been adversely affected, as polymer granules the primary raw material for packaging are by-products of refineries. Supply constraints and higher costs have impacted packaging material availability and pricing.

Slag, which is a key raw material for our composite cement production, has not experienced any major disruption. Therefore, the slag supply remained adequate during FY26.

Despite the prevailing turbulence, we have ensured seamless inflow of most raw materials. The only notable exception has been imported natural gypsum, where availability has reduced and prices have risen sharply. To address this challenge, we have successfully increased sourcing of alternative chemical gypsum from domestic sources.

We remain hopeful of a gradual restoration of normalcy during FY27. Nevertheless, uncertainties and the lingering effects of the conflict continue to pose potential risks to supply chains and input costs.

C.3. Opportunities and Outlook

Housing & Real Estate:

I. PMAY (Pradhan Mantri Awas Yojana) -Urban Allocation of 18,625 crore

II. Urban Infrastructure & Redevelopment: The budget allocates 10,000 crore for the Urban Challenge Fund to support brflownfield projects and urban redevelopment.

III. Tier II & III Focus: A new initiative for mapping and developing Tier II and III city economic regions, with an allocation of 5,000 crore per region over a five-year period.

IV. The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) received 8,000 crore for upgrading water supply, sewerage, and drainage systems

V. Delivering a Powerful push to Infrastructure:

Industrial Revival: A scheme to revive 200 legacy industrial clusters, focusing on technology and infrastructure upgrading.

High-Speed Rail: Development of seven high speed rail corridors as Grflowth Connectors.

Public capital expenditure to be increased to

12.2 lakh crore in FY 27

Infrastructure Risk Guarantee Fund to strengthen the confidence of private developers regarding risks during infrastructure development and construction phase.

To accelerate recycling of significant real estate assets of CPSEs through the setting up of dedicated REITs.

To promote environmentally sustainable movement of cargo a New Dedicated Freight Corridors to be established connecting Dankuni in the East, to Surat in the West and 20 new National Waterways (NW) to be operationalised over next 5 years, starting with NW-5 in Odisha to connect mineral rich areas of Talcher and Angul and industrial centres like Kalinga Nagar to the Ports of Paradeep and Dhamra.

Industrial Development:

The Company foresees no let-up in cement demand in the construction sector. Key drivers are the provisions in the FY 27 budget

i. A Scheme for Enhancement of Construction and Infrastructure Equipment (CIE) to be introduced, to strengthen domestic manufacturing of high value and technologically advanced equipment.

ii. Medical Tourism: Five new regional medical hubs to be established to promote medical tourism.

iii. SME Grflowth Fund: A 10,000 crore fund proposed to create MSME future champions.

iv. Semiconductor Mission 2.0: Launch of the next phase of the semiconductor mission.

v. Rare Earth Corridors: Specialized corridors established in Odisha, Kerala, Andhra Pradesh, and Tamil Nadu.

C.4. Threats

Supply chains and fuel prices continue to face pressure due to the ongoing conflict in the Middle East. Global demand remains subdued, with the IMF projecting only modest grflowth in world GDP. The evolving tariff structure is adding uncertainty to international trade and investment decisions. In addition, foreign portfolio investment recorded a net outflow of approximately US$16.4 billion in FY26, reflecting heightened global risk aversion. We believe that fuel conservation measures, prudent monetary management, diversification of supply chains, and effective foreign exchange management will help mitigate these challenges and provide some relief

D. Company Review - Operational and Financial Performance

A snapshot of the Companys Financial performance for FY26 compared with FY25 is as under:

(INR in million)

Particulars	FY26	FY25
Revenue from Operations	23,295.9	21,488.8
Power & Fuel Cost	6,111.0	5,594.4
Freight and forwarding expenses	3,458.3	3,279.7
EBITDA (including other income)	3,185.8	2,848.9
Earning before exceptional items,	2,095.5	1,751.0
Interest and tax
Finance Cost	177.6	292.9
Net Profit after Tax	1,339.7	1,067.5
Earnings Per Share (EPS) INR	5.9	4.7
Book Value Per Share INR	60.5	61.6

Snapshot of some of the key Financial ratios are given below:

Particulars	FY26	FY25	Change
Trade Receivables Ratio (Days)	7.20	7.48	-3.80%
Inventory Turnover	7.17	7.87	-8.82%
(Finished Goods)(Days)
Interest Coverage Ratio (in times)	84.18	31.00	171.52%
Current Ratio (in times)	1.10	1.09	1.06%
Debt Equity Ratio (in times)	-	0.05	-
Operating Profit Margin (%)	12.39	11.19	1.2%
Net Profit Margin (%)	5.79	4.99	0.8%
Return on Net Worth (%)	9.68	7.45	2.2%

The primary reason for change in the Interest Coverage Ratio and Debt Equity Ratio is due to repayment of borrowings during the year.

Digitization initiatives:

Company undertook the following process improvements in FY26:

Project	Benefits
SafetyZone		The mobile application is designed to
Application		log Safety Zone visits conducted by
		officials within their assigned zones,
		helping strengthen safety compliance
		across all plant locations.
		The app activates the QR scanner only
		when the device is detected within a
		valid location boundary (based on
		GPS).
		To enhance security, real-time selfie
		authentication is implemented during
		check-in using the device\u2019s front
		camera, ensuring the presence of the
		actual user.

A zone-specific questionnaire is provided for officials to complete during each visit.

The app can redirect users to the SafetyAssure application when they need to report a near-miss incident.

Dashboards and reports are available to monitor routine Safety Zone visits, supporting analysis and management-level reporting.

HCScan2Join An application designed to capture Application contractor, mason, retailer and other details during meetings/events using QR codes or SMS.

QR codes are generated via the mSFA system using the meeting ID, embedding event-specific details.

Influencers can record their attendance by scanning the QR code (for smartphone users with WhatsApp) or via SMS (for basic phone users).

Enables real-time reporting and dashboard visibility through a web-based portal.

E. Product Performance and Customer Relations

Product Performance

We recognize that our success is deeply intertwined with that of our customers. At the heart of our business strategy lies a strong commitment to innovation. Through proactive engagement and attentive listening, we strive to consistently exceed customer expectations, fostering long-term relationships built on trust and reliability.

In response to the evolving demands of the construction industry, we have continuously invested in research and development. This commitment has enabled us to expand our product portfolio with innovative solutions like the launch of Power Shield, a water-repellent cement that has significantly strengthened our market positioning and added a key milestone to our innovation journey. The sale of our premium products in trade segment has increased to 13% in FY26 as compared to 10% in FY25. Consumers normally use the best quality cement in slab casting including leakage proofing. Hence it is sold as a premium product. The brand was initially launched from Jhansi Plant and after excellent response, is nflow produced at Damoh also and is available across our central India markets.

We have introduced OPC-43 grade cement. The same has been launched to supply to the product requirement of the Non-Trade Customers in our key markets

Customer Experience

To strengthen customer centricity and drive sustainable grflowth, we continued to enhance our digitally enabled customer service ecosystem during FY26.

Building on the strong foundation of the Sales Excellence Program RISE launched in FY24, FY26 was focused on institutionalizing best practices and scaling high-impact initiatives across markets. The program continued to sharpen our competitive edge through targeted interventions in branding, customer engagement, channel expansion, and sales capability development.

As part of RISE, multiple strategic initiatives were undertaken during the year to improve sales productivity, strengthen market presence, and drive profitable grflowth across key focus segments.

Training and Learning Programs -

We nflow have a continuous learning program aligned with business objectives via a learning academy run by an internal trainer and enabled by regional HRBPs to ensure continuous up-skilling of field team.

To drive profitability and topline, we have a 4-pronged strategy as given below.

1. Sell More of Premium Products: Targeting a salience of >20% for Power Shield to enable higher realizations

2. Sell More in Focus Markets: High NSR markets being the focus of sales to improve profitability

3. Move Less and Handle Less: Convert more orders to direct dispatch

To effectively execute this policy, we focus on the following competency areas in our learning and development programs

a) Sales Skill: Selling skills, delivering the right pitch, understanding the client

b) Product Knflowledge: Value proposition, selling VAPs, dealing with engineers and architects

c) Commercial Acumen: Price dynamics, volume and EBITDA analysis

d) Behavioral and Soft Skills: Personality development and leadership styles

CRM Enhancements

Our CRM ecosystem is a continuously evolving piece, and we have added the following enhancements in the last year.

1. CRM for Nontrade: 20% of our sales come from non-trade channel and we have extended CRM to the Non-Trade team to drive structured approach to building and maintaining relationships with the institutional clients

2. Scan2Join: With the implementation of Scan2Join, we will be able to capture details of all influences we engage with and create customized engagement plans for greater efficacy. We nflow have a 360° view of the transactions, redemptions and engagement

Sambandh + Influencer Loyalty Program

Our enhanced influencer loyalty program has entered in its 3rd year and have been pivotal in driving success of our premium Product Power Shield. While the over all influencer sales remain between 45% 50% of the trade sales, Sambandh+ has given us more than 10k active monthly influencers driving sales of our premium products

Launch of Scan2join has further strengthened the reach of the loyalty program and has given us the ability to track the engagement at an individual level. Mitigation Measure: We will focus on cost reduction measures, de-bottlenecking, improvements in efficiency parameters, new projects and new geographies.

Power Shield Sales

Our total Power Shield sales have achieved an overall salience of 17% in most areas and we are nflow striving for >20% in FY27.

Our channel penetration for Power Shield has increased from 48% in FY25 to 68% in FY26 and improving numeric reach has been the key reason behind the scale-up of our premium products.

Social and Digital Media

During FY 2025 26, the Company strengthened its digital presence through sustained engagement and focused content strategies across key social media platforms. Here are the key highlights of our grflowth:

? The Companys Facebook community grew by 31,405 followers, reaching a total base of 2,08,307 followers.

? Instagram witnessed an increase of 22,103 followers, taking the total to 32,539.

? YouTube recorded a substantial grflowth of 90,801 subscribers, bringing the overall subscriber base to 2,16,774.

This steady grflowth reflects the Companys commitment to building meaningful digital connections with its stakeholders.

Throughout the year, HeidelbergCement consistently leveraged social media platforms to communicate its brand ethos, values, and initiatives. A diverse mix of content, including regular posts and interactive stories, was deployed to effectively shflowcase the Companys positioning and strengthen audience engagement. These efforts ensured a consistent brand voice and enhanced visibility across digital touchpoints.

In addition to organic grflowth, the Company made strategic investments in digital communication through Meta and Google platforms to amplify its outreach. Campaigns executed on Meta platforms achieved a reach of approximately 92.77 million users and generated around 717.45 million impressions. Simultaneously, Google-led campaigns reached about 73.47 million users, delivering nearly 293.38 million impressions.

These targeted digital initiatives significantly enhanced brand awareness and reinforced HeidelbergCements position in the competitive landscape.

F. Business Risks and Concerns

The Companys foreseeable risks are monitored and mitigated through controls, diversification, contracts, insurance where available and contingency plans.

Major business risks and their mitigation strategies are as follows:

I. Economic Risk:

India is at a risk to be drawn into the global conflicts. The Middle East North Africa region trade with India is BUSD 225 and almost 50% of energy supplies as in early 2026. The fall in rupee value vis a vis major currencies is further compounding the risk.

Mitigation Measure: We will focus on cost reduction measures, de-bottlenecking, improvements in efficiency parameters, new projects and new geographies.

II. Supply Risk:

External Risks: Ex - Shortage risk, Supply risk, Environmental risk and Business risk.

Internal Risks: Ex - Manufacturing Risks, Business Risks, Planning and Control Risks and Mitigation and Contingency. Unviable import prices is driving indigenous demand and prices.

Mitigation Measure:

Foreseeing the ongoing conflicts, we have initiated increasing dependency on indigenous with timely contracts that helped us to mitigate high prices of fuels. With sufficient stocks of coal and petcoke, we focused on viable fuels with change in fuel mix that helps us to maintain prices within budget.

We have focused on raw material stocks since war broke envisaging that diesel/fuel prices will impact future stocks and prices by increasing supplier base and securing quantities timely wherein nflow we are in comfortable position for next two quarters with minimal effect.

We have also moved towards indigenous chemical gypsum for our cementious material with initiative starting from 2024 and nflow our chemical gypsum substitute rate is more than 28% reducing drastically dependency on natural gypsum imported from Oman.

Towards sustainability, cost effective measures and reducing variable cost, we are focusing on maximizing PPC based cement with a target of approximately 1.5 Mn of fly-ash for FY27 sourcing from various sources with even pushing conditioned and wet fly-ash.

We have also developed various sources of Slag for continuous and uninterrupted supply of slag for producing composite cement with contracts in place securing 2 Mn tons per annum. This initiative is also towards sustainability with a goal of increasing Clinker to Cement ratio.

We are continuously trying to maintain leadership in AFR usage not only towards sustainability but also towards reducing variable cost being AFR cheaper than fossil fuels and petcoke in current risk scenario. With continuous investment in technology and modifications, your company has demonstrated a remarkable improvement in AFR consumption by increasing from 1.0% in FY 2021 22 to 10.63% in FY 2025 26, through the successful processing and utilization of 79.7 KT of Alternate Fuels.

Our centralization concept since mid-2024 has shflown visible results by increased SAP Ariba usage of RFQs and e-auctions, bundling of PRs, volumes, annual rate contracts with periodical reviews towards improved efficiency, traceability, accountability. The following are the highlights of centralization and digitization:

- Started service buying through catalogues, faster order conversion

- Adoption of different sourcing strategies like Japanese E-Auction Dutch Auction in services and many other items.

- OEM De-coding: Broken the myth of OEM supplier that good quality is only associated with OEMs.

- Developed new suppliers with same or better technical capabilities.

- Achieved more than 92% in Suppliers Responsibility Index

III. Competition Risk: Competition has increased in our core markets challenging our market share.

Mitigation Measure:

Installing Cement Blending and Grinding Unit at Sri Singhaji Thermal Power Plant, Dongalia, Khandwa for market expansion in western Madhya Pradesh.

Scaling up the volume of Power shield brand.

Scaling of OPC 43 grade cement to defend our non-trade key markets.

Continue to balance of extracting from Home and distant markets.

Developing new markets in Rajasthan and Western UP.

G. Internal Control Systems

The Company has established automated and digitalized processes for internal control and compliance systems that are regularly updated to minimize human interventions. These are discussed in the meetings of Audit Committee along with the risk based annual Internal Audit Plan. The Internal Audit Plan evaluates internal control systems, compliance, robustness of internal procedures, sound business practices, safeguarding Companys assets, compliance with laws and regulations, accuracy in Financial reporting and completeness in records.

Process flowners undertake corrective actions in the time frame which is followed up. Material observations are placed before the Audit Committee. Statutory auditors have also audited the internal controls over Financial reporting and have opined that the same are adequate and are operating effectively.

The Company ensures that well-structured and effective controls remain in place that are commensurate with the size of its operations.

H. Human Resources

a. To build a structured and sustainable learning ecosystem that strengthens the Sales & Marketing function and develops future leaders, HCIL has expanded its capability-building efforts by launching a focused Sales Training Academy. The key training programs under the Sales Training Academy include:

i. Selling Skills & Personality Development Training

ii. Breakthrough in Managerial Effectiveness Training

iii. Mind Unlimited Training iv. Product Training v. Prospect Training vi. Technical Training

b. HCIL is scheduled to launch dedicated Learning Management System (LMS) for Sales & Marketing function, during May2026. The LMS will offer specialised e-learning modules including videos and post training assessments. The e-learning will be accessible both on Desktop and Mobile applications and all Sales & Marketing employees can periodically pursue and complete assigned trainings to them. Following proposed modules will be launched:

I. Prospect Module II. Selling Skills Module c. International Womens Day Celebrations at HCIL :

As part of the celebration, we hosted a Womens Day Financial EmPowerment Session, aimed at reinforcing greater Financial awareness, confidence, and independence for all women employees. The session highlighted the importance of thoughtful Financial planning and informed decision-making, encouraging our team members to take meaningful steps towards ensuring a more secure and stable future. Aligned with this years theme, Give To Gain, we believe that when we give ourselves the gift of Financial knflowledge and clarity, we gain confidence, security, and long-term stability.

d. To systematically evaluate and enhance capabilities of blue collared workers, skill matrix assessments have been successfully implemented at Jhansi. This initiative helps us identify skill gaps and deploy targeted training interventions. As a result, we are seeing improvements in productivity, quality, and workplace safety.

Cautionary Statement

Statements in the Management Discussion and Analysis Report, which describe the Companys objectives, projections, estimates, expectations or predictions, may be considered to be forward-looking statements within the meaning of applicable Securities Laws and Regulations. These statements are based on certain assumptions and expectations of future events. Actual results could However materially differ from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian political, economic, and demand-supply conditions, finished goods prices, raw materials cost and availability, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, Policies, tax regimes, economic developments within India besides other factors such as litigation and industrial relations as well as the ability to implement strategies. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent development, information or events or otherwise.