Saurashtra Cement Ltd Management Discussions

The Board of Directors of Saurashtra Cement Limited ("Your Company") presents the Management Discussion and Analysis Report for the Financial Year ended 31st March, 2026. This Report provides a comprehensive overview of your Companys Operational and Financial Performance, and future outlook. This Report is prepared in compliance with Regulation 34(2)(e) read with Schedule V Part B of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended.

REPORT STRUCTURE AT A GLANCE

Indian economy continues to demonstrate resilience despite global uncertainties and geopolitical conflicts. Indias GDP growth of 7.4 percent in Financial Year 2025-26, is the highest amongst the top 30 countries in terms of GDP. It is further expected to grow at about 7 percent per annum over the next 3 years. Strong domestic consumption, improving rural demand and sustained credit growth are expected to support the economic momentum in the next few years.

Though infrastructure investment and policy continuity continue to support economic activity, global uncertainties, geopolitical tensions, trade disruptions, and financial vulnerabilities remain key concerns in the short term. Prolonged conflict in West Asia may lead to higher crude oil, natural gas, and fertiliser prices, which could increase input costs resulting in inflationary trends and could impact profitability across sectors.

The Indian cement industry continued to witness steady growth supported by infrastructure development, urbanisation, housing demand, and industrial activity. Increased construction activity across roads, railways, commercial projects, residential developments, and other infrastructure segments continued to support demand for cement during the year.

Indias infrastructure thrust has increasingly focused on improving connectivity, logistics efficiency, and integrated transport networks, alongside development of traditional infrastructure assets. Continued capital expenditure and investment activity remained key growth drivers for the sector. Cement production recorded healthy growth of 8.6 percent during the year, reflecting continued momentum in construction and infrastructure-related activities.

Cement demand is expected to maintain growth momentum, supported by ongoing housing and infrastructure activities. Tax rationalisation measures like reduction in GST on cement are also expected to support the sector by reducing construction costs and improving demand conditions. The volatility in the energy costs may restrict the governments spending on infrastructure which in turn may delay the consumption growth.

About 80 Million Tons per annum capacity has been added in the last two financial years aggravating the supply overhang with an all India installed capacity of about 715 Million Tons per Annum compared to consumption of about 500 Million Tons per annum. Further about 70 Million Tons per annum capacity addition is expected in Financial Year 2026-27 and about 270 Million Tons per Annum between 2027 to 2031. The capacity utilisation for the industry is expected to remain around 72-73 percent.

The industry may continue to face challenges arising from geopolitical uncertainties, input cost fluctuations, and competitive pressures. The ongoing West Asia conflict may impact the Indian cement industry through higher energy, fuel, freight, and raw material costs, particularly due to rising prices of petcoke, coal, and crude oil, which could exert pressure on industry margins and profitability.

The cement prices remained under pressure for a major part of the year due to intense competition and fragmented nature of the industry and were lower than the previous year even after adjusting for the reduction in GST. The decline in the cement prices was far higher than the reduction in the fuel prices resulting in shrinking of operating margins across the cement industry. Cement prices are expected to increase in Financial Year 2026-27 on account of rising cost pressures. However, the price increase may be limited due to rising competitive intensity and the operating margins are expected to remain under pressure.

Operations and Performance

During the year under review, your Companys cement sales volume increased by about 12 percent. Higher sales were supported by increased grinding capability at the Sidheegram plant following modernisation of cement mills including close circuiting of the mills, installation of fly ash storage and feeding systems etc. Your Company increased its focus on blended cement resulting in 19 percent higher blended cement volumes compared to the previous year. Your Companys ability to further increase blended cement production continues to be constrained by the limited availability of viable fly ash and slag in the region.

Your Companys focus on operating efficiencies and cost optimization resulted in lower power consumption and higher captive power generation compared to the previous year.

KEY DEMAND DRIVERS

The Indian paints industry continued to witness steady growth driven by urbanisation, housing demand, infrastructure development, and rising consumer spending on home improvement and aesthetics. Decorative paints remained the dominant segment, supported largely by repainting demand and residential construction activity, while industrial coatings continued to benefit from growth in automotive, engineering, and infrastructure sectors.

During the year, the industry witnessed increased competition due to capacity expansion and aggressive market entry by new players. Higher discount structure, pricing pressure, and softer urban demand impacted industry margins and profitability during the year. At the same time, organised players continued to strengthen their presence through wider distribution networks, product innovation, technology adoption, and brand positioning.

The industry also witnessed increasing preference for eco-friendly, water-based, and value-added coatings, reflecting changing consumer preferences and growing environmental awareness. However, volatility in raw material prices, particularly crude oil derivatives and titanium dioxide coupled with exchange fluctuations, continued to remain a key challenge for the sector.

The Indian paint industry may face cost pressures arising from volatility in crude oil-linked raw materials, titanium dioxide imports, and logistics costs, along with intensified pricing competition, which will impact the raw material cost.

FUTURE OUTLOOK OF THE PAINT INDUSTRY

The long-term outlook for the Indian paints industry remains positive, supported by continued growth in housing, urban development, infrastructure activities, and rising disposable incomes. Increasing repainting frequency, premiumisation, and low per capita paint consumption in India compared to global levels continue to provide significant long-term growth opportunities for the industry.

Growing focus on sustainable products, technology-driven solutions, and expansion into underpenetrated markets is expected to support future industry growth. However, competitive intensity and input cost fluctuations are likely to remain key factors influencing the performance of the paints companies in near term.

Your Companys sales volume increased during the year resulting in 12 percent increase in revenue despite depressed price realizations. Your Company focussed on widening of its distribution network and sale of better margin products like emulsions.

KEY FINANCIAL RATIOS

The clinker production for the year stood at 27.38 lakh tons, representing an increase of 8.2 percent over the previous years production of 25.31 lakh tons. This growth was primarily driven by higher kiln operating days at the Sidheegram Plant.

Cement production during the year reached 31.13 lakh tons, reflecting an increase of 11.9 percent compared to 27.80 lakh tons in the previous year. Higher cement production at the Sidheegram Plant, including increased blending, was facilitated by the successful completion of the close-circuiting project for the cement mills, which also included installation of fly ash storage and feeding systems, along with improved availability of fly ash.

The total sales of cement and clinker stood at 31.72 lakh tons as on 31st March, 2026, as against 28.78 lakh tons as on 31st March, 2025, registering a growth of 10.2 percent over the previous year.

During the year under review, EBITDA increased to Rs 71 crores as compared to Rs 61 crores in the previous year, primarily driven by lower energy costs.

During the year under review, the total sales volume of paints increased by 6 percent over the previous year. EBITDA before advertisement and promotion expenses for the Financial Year 2025-26 remained negative at Rs (1,189) lakhs as compared to a negative EBITDA of Rs (1,643) lakhs in the corresponding period of the previous year. After accounting for advertisement and promotion expenses, EBITDA for the Financial Year 2025-26 stood at a negative Rs (2,110) lakhs as against a negative EBITDA of Rs (2,391) lakhs in the corresponding period of the previous year.

Your Company continues to focus on strengthening its portfolio of high-value products that contribute significantly to overall business performance. Although there has been an improvement in the contribution from such products, growth remains approximately 40 percent below expectations. Your Company is also undertaking initiatives to strengthen brand positioning and expand its market presence across India, while simultaneously exploring opportunities to enter overseas markets. Despite prevailing market challenges, the management remains committed to achieving long-term growth and profitability through disciplined execution and strategic initiatives.

Your Company is committed to minimising the environmental impact of its operations and embedding sustainable practices across all facets of its business. Environmental stewardship is not merely a compliance obligation but a core strategic priority, reflecting your Companys long-term vision of being a responsible corporate citizen.

MANAGEMENT SYSTEM CERTIFICATIONS

SAFETY INITIATIVES

- Structured framework for hazard identification, risk assessment, and incident prevention.

- Regular safety audits, inspections, mock drills, and structured training programmes conducted across operations.

- Behaviour-based safety initiatives and awareness sessions undertaken to strengthen safety culture.

- Observation of National Safety Day and National Fire Service Day to reinforce safety awareness.

- Continued focus on maintaining a “Zero Harm” workplace environment for employees, contractors, and stakeholders.

GREEN AND SUSTAINABILITY INITIATIVES

- Installation of advanced pollution control systems including ESPs, Reverse Air Bag Houses, Jet Pulse Filters, and SNCR systems to control emissions.

- Continuous monitoring and periodic upgradation of pollution control systems to comply with statutory environmental standards.

- Implementation of rainwater harvesting and groundwater recharge initiatives through mine pits.

- Installation of piezometers at plant and mining locations for groundwater monitoring and environmental assessment.

- Observation of World Environment Day, World Water Day, World Ozone Day, and Earth Day to promote environmental awareness.

- Conduct of environmental awareness programmes, quizzes, training sessions, and poster competitions for employees and stakeholders.

- Plantation of approximately 20,000 saplings during Financial Year 2025-26 with focus on green belt and high-density plantation development.

- Continued commitment towards sustainable development, environmental stewardship, and responsible business practices.

Your Company has established a structured risk management framework to evaluate, monitor, and mitigate risks that could impact its business objectives. The Board of Directors, through the Audit Committee and Risk Management Committee, oversees the risk management process. The major risks are as applicable to the industry like regulatory issues for old mines, surplus capacity in industry like the amendment in the MMDR Act.

Your Company has established adequate internal control systems commensurate with the nature, size, and complexity of its business operations. These systems are designed to ensure the orderly and efficient conduct of business.

The key elements of your Companys internal control framework are as follows:

The Statutory Auditors of your Company have reviewed the adequacy of Internal Financial Controls over Financial Reporting in accordance with the Companies Act, 2013, and have expressed their opinion thereon in their Audit Report.

At your Company, employees are the most valuable asset. Their skills and dedication drive the success and help achieve the strategic goals of the organisation. Your Company maintains harmonious industrial relations and invests significantly in employee training and development.

HUMAN RESOURCE METRICS

SAFETY COMMITMENT

Safety is embedded in your Companys operational culture through a robust management system aligned with the international standard ISO 45001:2018. Your Company operates with a Zero Harm philosophy, placing safety of employees, contractors, and visitors as the non-negotiable first priority.

Companys commitment to people-first practices has fostered a year of harmonious employee relations and strong industrial ties. Industrial relations have remained cordial, and employee relations have been harmonious throughout the year.

Safety highlights during the year include observance of National Safety Day and National Fire Service Day, regular safety audits and awareness sessions, and first-aid and emergency response training for employees and contract workers.

KEY HUMAN RESOURCE INITIATIVE

- E-learning platform for continuous skill development and on-the-job training across plant and corporate employees.

- Digital Transformation initiatives for employee data management and HR process automation.

- Performance Management System aligned with organisational and individual KPIs, with structured mid-year and annual review cycles.

Your Company has actively engaged with the communities in and around its plant locations through meaningful and impactful CSR initiatives. Guided by the CSR Policy of your Company, these initiatives focus on health, education, clean drinking water, environmental care, and rural development ,creating sustained positive impact for local stakeholders.

CAUTIONARY STATEMENT

The statements in this Report regarding your Companys objectives, projections, estimates, and expectations are forward-looking and based on assumptions about future events. These statements are subject to risks and uncertainties, and actual results may differ significantly from those expressed or implied. Factors that could affect your Companys performance include global and domestic demand conditions, raw material costs, fuel prices, transportation costs, changes in government regulations, tax structures, and the broader economic environment in India. Your Company does not assume responsibility for any modifications to these forward-looking statements, which may change based on new developments or information.