Mangalam Cement Ltd Management Discussions

CEMENT INDUSTRY DEVELOPMENT AND OUTLOOK

Buoyed by robust domestic demand, an expanding manufacturing base, sweeping structural reforms, and progressive government policies spanning multiple sectors, the Indian economy is poised to sustain its upward trajectory. The Reserve Bank of India (RBI) has elevated its real GDP growth projection for FY 2025-26 to a promising 6.5%. Meanwhile, the International Monetary Fund (IMF) anticipates India surpassing Japans current GDP of $4.4 trillion by 2025, and Germany by 2027 -heralding Indias emergence as the worlds third-largest economy.

The broader economic outlook remains optimistic, underpinned by a dynamic thrust in infrastructure development, substantial public capital outlays, and productivity-boosting reforms. Together, these factors are set to fortify Indias medium-term growth prospects with renewed vigor.

During FY 2025, cement demand registered a tempered growth of approximately 4.5% to 5.5%, influenced by a challenging high base from the preceding year. This moderation was further impacted by the subdued onset of the fiscal year owing to general elections, relentless heatwaves, a transient shortage of labor, and a deceleration in construction activity. Following this relatively modest performance (~6% YoY versus ~9% YoY growth in FY22-24), the demand trajectory is projected to rebound with an estimated 7-7.5% annual growth in FY26E and FY27E.

The cement industry is set to witness significant capacity augmentation, with an estimated 70-75 million metric tonnes (MT) slated for addition across FY 2025-26. Of this, approximately 33-37 million MTPA is expected to comprise clinker capacity, with the remainder dedicated to grinding capacity. FY 2025 alone is expected to contribute 33-35 million MT, followed by a 37-39 million MT addition in FY 2026. Over the next five years, the industry is forecast to expand by 230 MTPA, reaching a formidable total of 900 MTPA - though the challenge of optimal capacity utilization will persist.

A resurgence in demand is anticipated across multiple segments, fueled by enhanced capital allocations for infrastructure and housing ministries. The rapid pace of urbanization, coupled with visionary governmental initiatives such as the Smart Cities Mission, Pradhan Mantri Awas Yojana (PMAY), and the AMRUT program, is expected to invigorate demand for residential, commercial, and civic infrastructure -significantly boosting cement consumption.

Simultaneously, large-scale government initiatives focused on rural infrastructure - including the construction of roads, schools, healthcare centers, and sanitation facilities - have catalyzed cement demand in the hinterlands, opening up fresh market avenues in previously underpenetrated regions.

The urban housing segment, which encountered headwinds in FY 2025 due to a lull in the real estate sector, is projected to regain traction in the ongoing fiscal. This revival will be driven by a lower base effect, anticipated interest rate cuts, and expedited execution under PMAY-Urban. Notably, the scheme has received a 45% increase in allocation in the Union Budget 2025-26, reflecting strong governmental commitment and promising momentum for the housing sector.

COMPANY PERFORMANCE REVIEW

l FINANCIAL HIGHLIGHTS ( in Lakhs)

Your Company has produced 3.49 Million MT of cement as compared to 3.38 Million MT in the previous year and registered an increase of 3.25 % in volume.

Revenue from Operations decreased by 2.58% from 1,72,548.09 lakhs in the previous year to 1,68,098.78 lakhs in the current year.

Profit before depreciation and tax decreased by 2,469.75 lakhs from 17,332.35 lakhs in the previous year to 14,862.60 lakhs in the current year.

Net Profit of the Company decreased by 1,465.35 lakhs from 5,971.66 lakhs in previous year to 4,506.31 lakhs in the current financial year.

l Production in MMT

Clinker production decreased by 4.62% in comparison to previous year and production of cement increased by 3.25% in comparison to previous year.

l Cement Sales and Dispatch Volume in MMT

l Power and Coal Consumption

l Power Generation

As a measure of reducing carbon footprints and cost control initiatives, Company is using alternate fuels such as Biomass and Biomass Briquettes from Soyabean, Mustard husks and Municipal waste available from our nearby areas.

This year also we have successfully achieved around 50% plus Bio-diesel use replacing Diesel in our vehicles at our plants and mines.

MCL is using battery operated Electric Vehicles (EVs) in material handling operations at plant and has associated EVs operated vehicles for transportation of Fly Ash as well as Lime Stone.

MCL is actively implementing initiatives to rationalize its logistics costs, focusing on sustainability and cost reduction in logistics by optimizing its transportation mix, complemented by route planning, adherence to primary sources, commercial term renegotiation and the integration of GPS and other technologies to monitor and drive cost savings.

The Company has implemented several initiatives :

MDF division of the Company has shown strength during the financial year 2024-25 as compared to previous financial year and it is expected that MDF division would do better in financial year

2025-26.

The Company continues to strengthen its production and sales of premium products and reduce cost in coming year.

ENVIRONMENT, HEALTH AND SAFETY

Environment, Health and Safety (EHS) is one of the primary focus areas for your Company. Your Companys EHS policy is to consider compliance to statutory EHS requirements as the minimum performance standard and is committed to go beyond and adopt stricter standards wherever appropriate.

Your Company have planted over 70,000 saplings to ensure a dense green belt around the plant and mines areas. The Company encourages its employees and their families to actively participate in its plantation drives.

Your Company also provided financial assistance to several hospitals and also adopted CHC Morak under a scheme of the Government of Rajasthan and assisted its maintenance and refurbishment.

In your Company safety is of utmost importance and a culture of safety is brought in, not just for the Companys staff but also for contract worker, raw material supplier and transporter etc. through training programs/communications.

RISKS & MITIGATING STEPS

The key risks areas are periodically reviewed and systemically reviewed by the Senior Management. The Risk is an expression of uncertainty about events and their possible outcomes that could have a material impact on the Companys performance and prospects. Mangalam Cement is committed to ensure a secured business environment with proactive awareness, appraisal, and mitigation measures. The Company has proper enterprise risk management (ERM) policies in place to identify, manage and mitigate risks and emerge as a risk-focused organization.

Economic Volatility Risk : Macro-economic factors have always formed the fundamental baseline on which the economys industrial performance and slowdown may impact the Companys performance. Indias new government is implementing favorable policies and regulations that have strengthened business sentiments. With increased population, surged need for housing, moderating inflation, stabilizing currency and improved disposable income, the Company expects the demand for cement to grow sustainably.

Key Input Risk : Procurement of key raw materials at the right time and right price is an essential requirement for maintaining the overall cost of production. Any unforeseen increase may impact the Companys profitability. The recent volatility and up rise in the prices of fuel and certain raw materials have been a challenge and impacted the cost sheet of the Company. The Company has strategically averted this risk by maintaining sufficient limestone reserves to meet their captive requirements. It has also formed and maintained long-term relationships with the supplier to ensure consistent supply. Besides, the Company has undertaken various technological initiatives to optimize raw materials usage and enhance productivity.

Competition Risk : Increasing cement player within the industry may impact realization on account of stiff competition. To mitigate this risk, the Company has marked its product quality as its primary strength. Very efficiently, the Company has witnessed higher realizations per ton of cement on account of this uniqueness. It maintains a judicious mix of retail and institutional sales as well, which further strengthens its dealer base and retailer network. The Company also reinforced its marketing and sales team, enabling increased market penetration, retaining existing clients and acquiring potential customer, simultaneously.

Regulatory Risk : The legal landscape of the country is ever evolving and vast. Non compliance of laws and regulations may lead to reputational and financial risk to the Company. The Company has a robust internal system in place to keep a check on the compliances and it is made sure that the Company is in compliance with all the applicable laws and regulations. Regular sensitization and training programes are held.

Human Asset Risk : Human resource is one of the most important assets of any company. The lack of a judicious employee mix (experienced and new) may hinder the Companys overall growth. Therefore, to maintain a steady balance, utmost emphasis has been laid down on retaining experienced personnel and recruiting management trainees to create a robust team.

The Company provides specialized training to its employees and is consistently building a leadership pipeline. It maintains an attrition level that is much below industry standards.

Information Technology and Cyber Security Risk : Risk under this head primarily includes loss of data, manipulation of information, cyber attacks such as phishing and ransomwares, unavailiability of system. Protection of data and cyber security has become a key concern for companies. The Company uses SAP ERP for its core business activities such as finance, sales, procurement. The Company is constantly and continuously upgrading and strengthening its IT infrastructure and untakes periodic review of the same for further developing it with new systems and security features. The Company has proper and adequate mechanism for data security, authentication, backup and recovery.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Companys internal control procedures are adequate to ensure compliance with various policies, practices and statutes in keeping with the organizations pace of growth and increasing complexity of operations.

Your Company maintains a system of internal controls designed to provide reasonable assurance regarding the following:

l Effectiveness and efficiency of operations l Adequacy of safeguards for assets

l Prevention and detection of frauds and errors l Accuracy and completeness of the accounting records

l Timely preparation of reliable financial information

The internal controls and governance process are duly reviewed for their adequacy and effectiveness through periodic audits by independent internal and external auditor. The Audit Committee is periodically briefed on the corrective and preventive action taken to mitigate the risks.

HUMAN RESOURCES

Employees are the core strength and backbone of any organization. Your Company has always prioritized its people and actively takes steps in the personal and professional development of the people. The Company continues to nurture a blend of experienced and fresh employees in its talent pool, including highly qualified professionals, both technical and non-technical. Your Companys human resource management function is structured to achieve high level engagement of its people which in turn ensures both higher productivity and happy people and thereby improve the bottom line.

At Mangalam Cement, measures for employee safety, training, welfare, and development continue to get top priority at all levels and results are reflected in the improved quality and efficiency. Companys training programs and value-based teaching enhances motivational level among its people. The Companys industrial relations as well as public relations with all external agencies have been cordial. Your Company had 1,000 permanent employees, as on 31st March, 2025.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

The key financial ratios as specified under SEBI (Listing Oblications and Disclosure Requirements) Regulations, 2015 are as follows :

Explanations for variation of 25% or more in Key Financial Ratios:

Not Applicable.

RETURN ON NET WORTH

The return on net worth as on 31st March, 2025 has decreased to 5.29% in current year due to decrease in profit for the year.

CAUTIONARY STATEMENT

The statement in this report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations, or predictions may be forward looking, within the meaning of applicable securities law or regulations. These statements are based on certain assumptions and expectations of future events. Actual results could however differ materially from those expressed or implied. Important factor that could make a difference to the Companys operations include global and domestic demand-supply conditions, finished goods prices, raw materials cost and availability, changes in Government regulations and tax structure, economic developments and other factor such as litigation and industrial relations.

The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information, or events.