India Cements Ltd Management Discussions

OVERVIEw AND THE STATE OF YOUR COMPANYS AFFAIRS:

The global economy is expected to grow at a stable but moderate pace, supported by easing inflation and technology-led investments, amid persistent geopolitical and policy uncertainties. Inflation is moderating cautious monetary policies and higher interest rates in some economies. Geopolitical risks, especially related to energy markets, remain key downside factors, while digitalization, AI and energy transition drive medium-term growth.

India is projected to remain one of the fastest-growing major economies, with GDP growth moderating to around 6.5%, driven mainly by domestic demand and sustained public infrastructure spending. While higher energy prices and global uncertainties pose challenges to inflation and fiscal metrics, supportive policy measures, resilient consumption and strong underpin a favourable medium-term outlook.

India remains the second largest cement market in the world and continues to be one of the most consequential markets globally on account of the structural demand emanating from urbanisation, infrastructure creation, housing and an expanding industrial base. Installed cement production capacity at the close of FY 26 stood at 718 million tonnes per annum. Independent agencies estimate that 100 million tonnes of new grinding capacity will be commissioned over the two years ending FY 28.

Domestic cement demand during FY 26 grew by 6.4%, broadly tracking production. For FY 27, industry estimates converge in the range of 6.0 to 7.5% year-on-year growth, with the leading rating agencies placing growth at 6 to 7% and 7 to 8% respectively, supported by infrastructure, industrial and commercial construction segments, and a revival in housing demand.

Three external factors require close monitoring during the year viz movements in crude oil and petroleum coke prices amid geopolitical developments, the performance of the South-West Monsoon in the light of below-normal projections and its impact on rural demand, and changes in United States tariff policies along with their effect on the rupee and the cost of imported inputs.

The cement industry is expected to witness healthy mid-to-high single-digit demand growth, supported by infrastructure, housing and urban development. Although rising fuel and freight costs may pressure margins in the near term, large players with scale, diversified are well positioned to sustain growth. Long-term sector fundamentals remain strong, with consolidation and capacity additions reinforcing resilience.

BUSINESS PERFORMANCE:

The production and sales performance of the Company for the year are as under: (Lakh Tonnes)

	2025-26	2024-25	Increase / (Decrease)
Clinker production	70.26	66.25	6.05%
Cement production	103.00	89.80	14.70%
Cement & Clinker sales	104.50	89.77	16.41%

FINANCIAL PERFORMANCE:

		Rs. Crore
	2025-26	2024-25
Net Sales / Income from operations	4484.69	4080.39
Other Income	96.28	44.87
Total Income	4580.98	4125.26
Total Expenditure	4086.75	4455.25
Operating Profit	494.23	(329.99)

 

		Rs. Crore
	2025-26	2024-25
Operating Margin %	10.78	(8.00)
Interest & Finance Charges	99.33	267.17
Depreciation	299.12	239.43
Profit / (Loss) before Exceptional items	95.78	(836.59)
Exceptional items	(28.21)	54.13
Profit / (Loss) before tax	67.57	(782.45)
Tax Expenditure / Deferred Tax / MAT	(2.25)	(126.81)
Profit / (Loss) after tax	65.31	(655.64)

KEY FINANCIAL RATIOS:

Ratio	Basis	2025-26	2024-25	% change*
Debtors Turnover (Times)	Revenue from Operations / Average Trade Receivables	9.40	5.83	61.23**
Inventory Turnover (Times)	Revenue from Operations / Average Inventory	6.95	6.93	0.34
Interest Coverage Ratio (Times)	Profit before Finance Cost & Tax / Finance Cost	1.68	(1.93)	187.12**
Current Ratio (Times)	Current Assets / Current Liabilities	0.93	0.92	0.17
Current Ratio - excluding Current	Current Assets / Current Liabilities excluding	1.05	0.96	9.73
Maturities (Times)	Current Maturities
Debt to Equity Ratio - excluding short term borrowing and current maturities (Times)	Non-Current Borrowings /Total Equity	0.10	0.11	(9.22)
Debt to Equity Ratio - including short term borrowing and current maturities (Times)	Short term + long term debt + other fixed payments / Shareholders equity	0.13	0.12	11.55
Operating Profit Margin (%)	EBITDA / Total Income	10.17%	(6.69%)	252.13**
Net Profit Margin (%)	after tax / Total Revenue Net Profit	1.43%	(15.89%)	108.97**
Return on Net worth (%)	Profit after tax / Average Shareholders Equity	0.65%	(8.53%)	(107.66)**

* Figures in (-) represent adverse change.

** After takeover by UltraTech Cement Limited, better sales volumes, operational efficiencies, reduction in borrowing, improvement in credit rating and consequent reduction in interest rates, have resulted in better Debtor Turnover, Interest Coverage Ratio, OperatingProfitMargin, Net Profit

Margin and Return on Net worth.

CREDIT RATINGS:

CARE Ratings Limited has reaffirmed the ratings at CARE AAA, Stable

CARE A1+ (A One Plus) for Short-term bank facilities and CARE A1+ (A One Plus) for Commercial Paper of the Company.

GOING FORwARD:

The Company is incurring capital expenditure to the extent of Rs.2,014 crore over a period of two years towards expansion of the existing capacity by 2.80 Million Tonnes from 14.75 Million Tonnes to 17.55 Million Tonnes at an estimated cost of Rs.440 crore and modernization of the Companys cement plants at an estimated cost of Rs.1,574 crore. These capital expenditures are met through a mix of debt and internal accruals. During the year, the Company completed the migration of its product brands to the brand portfolio of its holding company. Synergy with its holding company will lead to economies of scale and a wider distribution network resulting in profitable growth. The Company is poised to grow stronger with an increase in sales, optimization of costs and efficient operations. With the increasing government spending on infrastructure and the improvement in demand in housing markets, the Company is well-positioned to strengthen its presence in its core markets.

RISK MANAGEMENT:

The Indian cement industry, a key enabler of national infrastructure development, operates in an environment characterized by evolving market dynamics, regulatory developments and operational complexities. In this context, your Company recognizes that a robust and forward-looking risk management framework is critical to sustain long-term value creation and resilience.

Your Companys approach to risk management focuses on the systematic identification, assessment and management of risks, including their avoidance, mitigation, transfer or acceptance, as appropriate.

Your Company has in place a Board-level Risk Management Committee ("RMC Committee") to oversee the risk management process. The RMC Committee discharges, inter alia, the following key responsibilities:

Risk Identification: This is the first step in the risk management process and involves anticipating and ascertaining events, which, if occurred, could potentially cause an adverse impact on the business or its objectives. This step is carried out at regular intervals with respect to continuing operations and specifically every time a new business activity is proposed or a new business strategy is being deployed.

Risk Assessment and Evaluation: In this step the impact of the potential risk, if it occurs, is quantifiedbased on the likelihood of the occurrence and the severity of its influence on the company/ its objectives. on the basis of their impact on the company and/or its operations. This classification equips the management to take a more informed and structured decision, be it with regard to changes in business strategies or continuing operations or with respect to upcoming projects or new strategies.

Risk Management and Mitigation: This step involves understanding the impact of the potential risk based on its classification above and other factors, if any, on a case to case basis; andaccordinglyinitiateactiontomitigate/effectivelymanage the same using existing mechanisms in place for the purpose, or if need be, devise a new action plan/ mechanism based on the requirement; and to ensure successful deployment of the mitigation plan.

Risk Monitoring and Reporting: The action plan/ mechanism so applied is constantly monitored and the effectiveness of its application vis-a-vis the achievement of the desired objectives is constantly evaluated and the progress is reported and recorded on a periodic basis.

KEY RISKS: Environmental:

With the regulatory framework constantly evolving with more and more compliance and legal requirements particularly on emissions, sustainability, etc., the industry is exposed to stringent controls and penalties. The Company strictly complies with all the statutory regulations with adequate investments on pollution control and environment ^{related equipment for controlling the emissions of CO}2^{, SO}x ^{and NO}x ^{and other greenhouse gas emissions to ensure a sustainable} environment. All the pollution control equipment at the plants are directly linked to the real time management of the State Pollution Control Boards and they are monitored regularly. The Company is taking various measures to conserve energy and thus reduce environmental impact and these measures will also help in reducing cost of production.

Raw Material Availability, Supply Vulnerability and Cost Volatility:

Limited availability of key raw materials, geopolitical tension, supply chain vulnerabilities and volatility in input costs may disrupt production continuity and adversely affect long-term operating costs.

The Cement manufacturing process is energy and raw material intensive and is exposed to the risk of securing the long-term availability of the same particularly with the changing laws of Mines and Minerals Development and Regulation Act ("MMDR") etc.

The availability of quality raw material and fuel at affordable prices are areas of concern. The Company is well equipped against this risk with an optimum mix of indigenous and imported coal and has stepped up usage of alternate fuels duly paving way for carbon emission reduction. As far as the raw material is concerned, the Company has got adequate limestone reserves with mining licenses and has got long term contract for supply of fly ash and other raw material from the nearby sustainable sources.

On the power front, the Company is fully equipped with back-up power systems. Plans are to increase use of waste heat, increase share of renewable power, conserve energy to reduce dependence on fossil fuel.

Cyber Security:

Higher dependence on information technology has increased the Cyber Security risk. The data safety, integration, and process technology are prone to any attack which can impact the business operation and all its assets. The company management has been carrying out vulnerability study of the systems and impact assessment audits are conducted by outside agencies and sufficient back up system for critical servers together with firewalls have been created. The Company uses best of threat protection software to prevent unwanted access to the Companys systems. The Company also provides training to its employees on risks of cyber security threats and global best practices to mitigate these risks.

Human Resources:

Retaining the talented manpower is a challenging task for the industry.

The Company has been taking various steps to ensure lesser attrition rate and provide an improved working environment for the employees for their continuance. Systematic review of training needs is being done to improve talents and morale and external faculties also address the employees to this extent. The company strives to provide excellent employer-employee relationship. The Company is now part of Aditya Birla Group and is gradually implementing groups best practices to improve employee welfare.

Health & Safety:

Health and safety incidents across high-risk operations may result in legal exposure, operational disruptions and adverse reputational impact.

The Company places the highest priority on employee and stakeholder health and safety, guided by a strong "Safety First" philosophy. It has established robust and evolving safety management systems, supported by a comprehensive Safety, Health and Environment (SHE) Policy covering all operations and associated risks. A culture of accountability is promoted through safety committees, regular training, and safety awareness programmes for employees and contract workers. The Company aims for zero harm and zero accidents through strict safety protocols, regular health check-ups, and provides protective equipment. Employee welfare is further supported through medical facilities, ambulances, recreational amenities, safety observances, and recognition of best safety practices.

Sustainability:

Sustainability is central to the Companys business strategy, with a strong focus on promoting a circular economy across climate, energy, and environmental practices. The Company continually improves operational efficiencies and has been an early leader in carbon emission reduction, being the first in the country to obtain a license for blended cement production. Its sustainability initiatives include expanding green cover at plant locations, reducing greenhouse gas emissions, conserving water, and supporting community development.

Throughsignificant surplus mine water to recharge village ponds and creating ponds in exhausted mines to support agriculture. It has also pioneered the installation of a Waste Heat Recovery System. The Company contributes actively to the circular economy by utilizing industrial waste and alternate fuels such as fly ash, slag, chemical gypsum, plastic waste, and biomass in cement manufacturing. Further reductions in carbon emissions are achieved through increased production of blended and slag cement, optimized fuel and raw mix designs, and effective control of SOx and NOx emissions. Treated wastewater is recycled for gardening and plant operations, and all environmental, social, and sustainability initiatives are transparently detailed on the Companys website under the ESG section.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has established a robust internal control framework commensurate with the size and complexity of its operations, supported by well-defined organizational structures, policies, and procedures. These controls ensure operational efficiency, safeguarding of assets, reliability of financial reporting, and transparent disclosures.

Internal financial controls are reinforced through clear delegation of authority and comprehensive checks and balances across all transactions. The Risk Management Committee periodically reviews the effectiveness of these systems and recommends improvements to strengthen governance practices.

The internal audit function, conducted by independent professional firms under a defined charter, covers transaction, systems, process, and stock audits. Annual audit plans are approved by the Audit Committee.

A structured budgetary control system is in place, with regular monitoring of operational and financial performance at granular levels and timely reporting to management for corrective action. Key performance parameters are also monitored on an ongoing basis to enhance efficiency.

The Audit Committee of the Board oversees financial reporting and internal controls in line with the SEBI (LODR) Regulations,

2015 and the Companies Act, 2013, along with such other responsibilities as may be assigned by the Board.

HUMAN RESOURCES & INDUSTRIAL RELATIONS:

Our people are our great assets and we try to provide them an excellent working environment and treat them as part of our family. The Company has also been maintaining very cordial relationship with all the stakeholders over a period of years. We have a robust policy for redressal of grievances or complaints and we provide a people friendly environment. With role of human resources evolving over a period of time, the Company has also been frequently adjusting to the needs with multi-tasking of the work force to hone their skills and to improve their morale. Various learning opportunities to enhance the skills and also for developing the future managers of the company are provided by the company. We are also empowering the employees through continuous development programmes and various contests are conducted at shop floor levels including Kaizen, Six Sigma, etc. along with awards and recognitions every quarter. The overall permanent employees on the rolls of the Company were 1420 at the end of the year.

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, ongoing geopolitical tension, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.