Saurashtra Cement Ltd Management Discussions

INDIAN ECONOMY

During the year Indian GDP grew at 6.5% with manufacturing and construction industries growing at 4.5% and 8.6%~9.4% respectively. According to World Bank projections, the Indian economy is expected to expand steadily at a rate of 6.7% during the Financial Years 2025–26 and 2026–27. Strategic initiatives from infrastructure upgrades to tax reforms are propelling domestic growth and establishing India as a pillar of global economic stability.

The continued strength of Indias economic performance, as projected by both the World Bank and IMF, highlights the resilience of its macroeconomic fundamentals and its growing strategic importance in the international economy.

The Reserve Bank of India (RBI) has implemented a stable interest rate policy throughout 2025 and Cash Reserve Ratio (CRR), which are expected to reduce cost of funding and enhance liquidity in the economy.

The Consumer Price Index (CPI) inflation has also eased, coming down from 5.4% in Financial Year 2023 24 to 4.6% in Financial Year 2024–25.

Robust growth is expected in the services sector, while manufacturing is likely to accelerate, supported by policy efforts to enhance logistics and streamline regulatory frameworks.

INDIAN CEMENT INDUSTRY

Though India is the second largest cement producer in the world with about 11% share in the global market, its per capita consumption of cement at 313 kg is lower than the world average of about 500 kg. Thus long-term consumption growth can be expected to be steady.

Financial Year 2024–25 proved to be a challenging year for the Indian cement industry. All India Cement consumption to the double-digit growth recorded in Financial Year 2022-23 & grewby about5%,asignificant Financial Year 2023–24. The slowdown was primarily due to reduced infrastructure spending during the election period and an extended monsoon season.

In the Companys primary market of Gujarat, conditions were challenging. A shortage of labour in the initial months on early and extended monsoon and construction disruptions due to a strike by aggregate transporters negatively impacted the business. Cement consumption in Gujarat contracted by about 6%, in contrast to the 5% national growth, intensifying competition in an already oversupply and fragmented market, leading to further pressure on price realization.

International fuel prices started softening but benefit of lower prices was partly offset by depreciation of Indian currency. The cost of raw materials has also increased due to high limestone cost and elevated fly ash and slag prices. The transport cost has remained stable in the last few years due to stable diesel prices.

Consolidation in the cement industry is gaining pace with about 63% of installed capacity held by the top five players compared to 44% in 2018.

FUTURE OF INDIAS CEMENT INDUSTRY

As per CRISIL and ICRA, two of the leading credit rating agencies, cement demand is expected to grow between 6.5%~7.5% in Financial Year 2025-26. The capacity utilization is expected to improve to 72%~73%. About 40 million tons capacity is likely to be added in the next 12~15 months.

The demand is expected to grow with back of increase in government spending in the infrastructure (Roads, Highways, Airports, Metro Rail facilities, Smart Cities) and affordable housing (additional 30 million houses to be built by 2030).

The declining trend in housing loan rates is also expected to strengthen the increase in demand.

The price realization are expected to improve marginally year over year on account of consistent growth in demand.

The geopolitical conflicts especially in the Middle East would adversely affect the cost of crude as well as coal and petcoke. Further, changing dynamics in the international trade would also affect the above cost.

The other challenges faced by the cement industry include encroachment of mines, regulatory changes governing mining of minerals and meeting carbon emissions targets with increasing stringent environmental regulations. The industry is moving towards increased use of renewable energy and demand to offset the increase in input costs.

PERFORMANCE AND OUTLOOK OF THE INDIAN PAINT INDUSTRY (2024 25)

The Indian paint industry experienced moderate growth in Financial Year 2024–25, marking a shift from its historically high double-digit expansion. Revenue growth slowed to approximately 4%, even though underlying volumes grew by more than 10%, driven by easing raw material costs and value-conscious consumer behaviour. Within this, the decorative paint segment which contributes nearly three-fourths of the total industry turnover witnessed muted value growth due to subdued urban demand, elongated repainting cycles, and a tendency among consumers to opt for more economical product ranges. These dynamics were further influencedby seasonal factors, such as an extended monsoon and temporary demand deferment during the general elections, which affected paint application schedules.

Despite these short-term challenges, the structural growth drivers of the industry remain robust. Rising disposable incomes, urbanization, growing aspirations for improved living standards, and government-led housing initiatives have continued to support paint consumption, especially in the decorative segment. Repainting constituting nearly 80% of decorative paint demand has been on a long-term upswing due to increasing homeownership and evolving aesthetic preferences. Additionally, the rising adoption of environment-friendly and low VOC paints is shaping the market in favour of innovation and sustainable solutions. The industrys fundamentals are underpinned by Indias relatively low per capita paint consumption compared to global benchmarks, pointing to substantial headroom for expansion.

Looking ahead, the industry is expected to witness a revival in Financial Year 2025–26, supported by improved consumer sentiment, favourable macroeconomic conditions, and continued formalization of the sector. The decorative paint market is poised for sustained growth driven by both new housing demand and periodic refurbishment in urban and rural households. As customer preferences evolve toward high performance, eco-friendly finishes, the industry is seeing a gradual shift toward premiumization, supported by innovation in product formulations and application technologies. Overall, the Indian paint sector, with decorative paints at its core, is well-positioned to maintain its long-term growth trajectory, aligned with the broader trends in housing, infrastructure, and lifestyle upgrades.

PERFORMANCE ANALYSIS

The total sale of cement and clinker was at 28.78 lakh tons as on 31^st March, 2025 as against 30.70 lakh tons in the previous year showing a decline of about 6% due to market constraints. The capacity utilization of clinker as on 31^st March, 2025 was about 91% of the installed capacity as against about 96% in the previous year. The capacity utilization of cement as on 31^st March, 2025 was about 103% of the installed capacity as against about 109% in the previous year. During the year under review, your Company as a whole reported an EBITDA of 6,093.61 lakhs, significantly lower than 16,586.39 lakhs in the previous year.

Despite operational improvements and cost efficiencies, the profitability of the Cement Business was impacted by weak price realizations due to fragmented nature of the industry coupled with excess capacity over demand.

During the year under review, the focus of the Paints Division was to increase the dealer network and to create market for the products like emulsion and primer. The divison is under the transition phase from a traditional cement company to a modern decorative paint brand.

Your Company continues to focus on cost optimization, enhancing operational efficiency, and increasing the share of high margin blended and specialty products. Efforts are also underway to strengthen brand positioning and expand market reach. While market challenges persist, management remains committed to long-term growth and profitability through disciplined execution and strategic initiatives.

YOUR COMPANYS AWARDS & ACCOLADES DURING THE YEAR 2024-25

AWARDS & RECOGNITION RECEIVED BY RANAVAV PLANT: National Recognition for Sustainable Excellence:

At the 8^th National Conclave on Mines & Minerals, held on 7^th August, 2024, in New Delhi, your Companys

Adityana Limestone & Marl Mines received the coveted 5-Star Recognition for its exemplary performance in implementing the Sustainable Development Framework during the Financial Year 2022–23. This accolade underscores your Companys steadfast commitment to responsible and sustainable mining practices.

At the 31^st Mines Environment & Mineral Conservation Week for the Financial Year 2023-24 held on 29^th September, 2024, following Environment Awards were awarded to Adityana Limestone and Marl Mines & Ran Bauxite Mines - Ranavav Unit:

AWARDS & RECOGNITION RECEIVED BY SIDHEEGRAM PLANT: Shining Bright at the National Stage:-

The Prashnavada-Morasa Limestone Mines earned prestigious 5-Star Recognition on 7^th August, 2024, at the 8^th National Conclave on Mines & Minerals held in New Delhi. At the 31^st Mines Environment & Mineral Conservation Week for the Financial Year 2023-24 held on 29^th September, 2024, following Environment Awards were awarded to Prashnavada-Morasa Limestone Mines:

KEY FINANCIAL RATIOS

The details of significant changes in key financial ratios of your Company for the Current previous Financial Year are given on the following table:

Ratio	Current Financial Year	Previous Financial Year	Variance, %	Reason for Variance
	2024-25	2023-24
Debtors Turnover (Days)	22.42	17.26	30%	Mainly due to Increase of Trade receivables & decrease in net sales
Inventory Turnover (Days)	61.55	46.21	33%	Mainly due to Increase in Inventory level & decrease in net sales
Interest Coverage Ratio	4.38	10.86	-60%	Consequential impact of decrease in profit
Current Ratio	1.16	1.20	-3%
Debt Equity Ratio	0.14	0.09	56%	Increase in bank Borrowings
Operating Profit Margin (%)	3.96%	9.40%	-58%	Decrease in profit, mainly due to comparatively lower sales volume and realization
Net Profit Margin (%)	0.45%	3.24%	-86%	Decrease in profit, mainly due to comparatively lower sales volume and realization

Your Companys Return on Net Worth (RONW) for Financial Year 2024-25 stood at 0.74%, a decline from 6.31%, in the Previous Financial Year 2023-24. This decrease is primarily attributed to lower profits, driven by reduced sales volume and price realization.

RISK AND CONCERNS

Your Company has internal control procedures to evaluate, monitor and review the risks impacting your Company.

The major risks identified by the Board of Directors/Committees are as under:

1. Availability of raw materials due to delays in environment clearances and or regulatory issues for renewal of mining leases as well as land acquisition.

2. High logistic costs restricting access to markets in neighbouring states.

3. Volatility in price realizations due to surplus capacity and fragmented nature of industry.

MANAGING EMPLOYEE RELATIONS WITH CARE

At your Company, employees are the most valuable asset. Their skills and dedication drive the success and help achieve the strategic goals of the organization. Your Company invests in continuous learning through an effective e-learning model, building a strong internal talent pool for future leadership.

With various Digital Transformation initiatives, your Company efficiently manages employee data, benefits, time tracking, and compliance while also supporting development through integrated learning modules.

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.

Your Company is committed to constant up-skilling of your employees through curated, knowledge and skills development training programs. During the year about 10550 man-hours of training were imparted in developmental and functional areas.

As on 31^st March, 2025, there were 809 employees on the Company payroll.

CORPORATE SOCIAL RESPONSIBILITY - EMPOWERING COMMUNITIES, ENRICHING LIVES

Your Company has actively engaged with neighbouring villages and communities through impactful CSR initiatives focused on health, education, clean drinking water, environmental care, and rural development. Your Company efforts aim to create lasting value for all, embracing inclusivity across gender, ethnicity, and religion.

HEALTH & WELL-BEING SUPPORT

At your Company, it is believed that a healthy body and mind forms the foundation of a productive workforce. Your Companys on-site health centre not only supports the well-being of employees and its families but also extends free healthcare services to the local community. Beyond treatment, your Companys Health Centre provides immunizations, occupational health services, TB nutrition kits, and health education programs.

YOUR COMPANYS COMMITMENT TO INTERNATIONAL SAFETY STANDARDS - OHSAS 45001:2018

Safety is embedded in our culture through a robust management system aligned with international standards. Your

Company is proudly certified under OHSAS 45001:2018, reflecting the commitment to world-class occupational health and safety practices.

YOUR COMPANY ENDEAVOURS TO PROMOTE CULTURE OF SAFETY

Regular initiatives such as National Safety Day, National Fire Service Day, safety audits, awareness sessions, and behaviour-based safety drives reinforce our safety-first approach. Through Zero Harm policy, your Company remains dedicated to protecting the well-being of all employees, contractors, and stakeholders involved in the operations.

PARTICIPATION IN SWACHH BHARAT ABHIYAN

Your Company actively participates in national programs such as the Swachh Bharat Abhiyan, collaborating with government initiatives and NGOs to promote sanitation and cleanliness in the community.

YOUR COMPANYS GREEN INITIATIVES

Your Company is committed to minimizing the environmental impact of its operations. The manufacturing unit is certified with ISO 14001:2015 for Environmental Management, ISO 9001:2015 for Quality Management, and ISO 50001:2018 for Energy Management.

To ensure clean air, your Companys factories are equipped with advanced pollution control devices like reverse air bag houses, electrostatic precipitators, and jet pulse filters. Additionally, existing pollution control equipment has been upgraded to meet statutory emission obligations.

Understanding the importance of water, your Company has implemented rainwater recharging pits and mine pits to help recharge groundwater levels in the surrounding areas. Piezometers have also been installed at the plant and mine areas to monitor the impact on the groundwater table.

Your Company actively observes environmental days like World Environment Day, World Ozone Day, World Water Day, and World Earth Day to raise awareness. Various training programs and competitions, such as environmental quizzes and poster competitions, are held to encourage environmental consciousness among employees and workers.

Tree plantation is a key focus for your Company. In Financial Year 2024–25, 16,396 saplings were planted, with a focus on high-density plantations. This contributes to the development of green belts at the plant and mine premises.

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, raw material costs, fuel prices, transportation costs, changes in government regulations, tax structures, and economic conditions 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.