Shri Keshav Cements & Infra Ltd Management Discussions

Industry Structure and Developments - Outlook

Cement industry is a highly energy intensive sector. Energy along with other raw materials mainly comprising coal and limestone forms a most critical component in the manufacturing of cement. While your Company does not face any problem with respect to the availability of limestone, its high priority is to keep its energy costs at minimum, which forms a significant portion of the input costs. In order to reduce the power consumption cost/ energy cost, Company is currently utilizing its own power generated from solar plant for production of Cement.

During the Financial Year 2024-25 the Company, for the third consecutive year has crossed the milestone of 100 crore turnover and has recorded turnover of Rs. 12,145.34 Lakhs for the FY 2024-25.

Opportunities and Threats Opportunities:

• Stable cement prices: A favorable pricing environment can improve the profitability of the company.

• Rising demand for infrastructure: Increased government spending on

infrastructure projects can boost the overall cement demand.

• Expansion into new geographic markets: Diversifying the market presence can reduce dependence on the current region.

• Product diversification: By introducing new cement products or related building materials, the company can tap into additional market segments.

Threat:

• Intense competition from established players: Established players with deeper pockets and wider distribution networks can pose a significant challenge to the company.

• Fluctuations in raw material prices: The increased costs of raw materials can erode the profit margins if not managed effectively.

• Government regulations: Changes in environmental or taxation policies can impact the companys operations and profitability.

• Economic downturns: A decline in construction activity can adversely affect the cement demand.

Outlook

Indias cement industry outlook for 2025 is positive, with projected demand growth of 6-7%o for FY26 (Financial Year 2025-26) after a modest 5%o in FY25, primarily driven by rural housing growth, government infrastructure initiatives like PMAY,

and infrastructure investments. While input costs have decreased, leading to potentially lower prices in FY25, the industry is set to experience a recovery in profitability by FY26 due to improved demand and price realization.

The key growth drivers will come from Rural housing, Infrastructure Development and Retail activity. With political stability, cement demand is expected to recover and propose in FY26.

The management has almost completed the CAPEX of 1 MT which will result in improvement of efficiency and operations. This ensuing financial year will see the completion of CAPEX in entirety and benefits as projected. With improved demand, the company is poised to deliver better results.

Nevertheless, the companys strategic advantages, including lower logistics costs, energy self-sufficiency and strong regional foothold, position it well to leverage market opportunities and drive growth. Effective management of financial and operational risks will be key in maintaining its positive trajectory and achieving long- term success.

Risk Management

Risk is inherent in all kinds of business and is an integral part of cement industry. In the normal course of business, a Company is exposed to various risks like Credit risk, Market risk and Operational risk, besides other residual risks such as Liquidity risk, Interest rate risk, Regulation risk etc. With a view to efficiently manage such risks, your Company has put various risk management system and practices. Your Company aims at enhancing and maximizing shareholders value by achieving appropriate balance between risks and returns. The risk management strategy adopted by your Company is based on a clear understanding of the risk and the level of the risk appetite which is dependent on the willingness to take the risk in the normal course of business.

However, the company faces some challenges such as, high-interest costs related to its solar plant which could impact the financial performance. Additionally, potential changes in government infrastructure spending and possible delays in the expansion timeline may affect growth. Competition from major cement players also presents a risk.

Segment Wise Performance

Revenue from Manufacturing and Trading in Cements for the FY 2024-25 amounted to Rs. 9,393.64 lakhs which is Rs. 399.69 Lakhs less than the revenue of FY 2023-24 of Rs. 9,793.33 lakhs.

Revenue from Dealing in Petrol and Diesel for the FY 2024-25 amounted to Rs. 974.02 lakhs which has increased by Rs. 110.73 Lakhs from the revenue of FY 2023-24 of Rs. 863.29 lakhs.

Revenue from Solar Power Generation and Supply for the FY 2024-25 amounted to Rs. 1,775.58 lakhs which has decreased by Rs. 212.62 Lakhs from the revenue of FY 2023-24 of Rs. 1,988.20 lakhs.

Internal Control System and their Adequacy

Your Company has a well-defined internal control system to support efficient business operations and statutory compliance. Internal Auditor carry out vouching of all accounting records and confirmation of balances and thereby assures the accuracy of accounting records. Suitable internal checks have been built in to cover all monetary transactions with proper delineation of authority, which provides for checks and balances at every stage.

Human Resources and Industrial Relations

Human resource is an integral part for any industry. Your company ensures that it provides clean and hygienic working conditions to employees and workers. The company also ensures that it provides adequate facilities to its employees and workers as per the prevailing Labour laws of the country. The Company has taken all precautionary measures for its employees against the Covid-19 pandemic and it has ensured that all its employees/workers are fully vaccinated and the Company has also ensured the use of Sanitizing machines at the factory premises and Thermal check of every employee, worker as well as the visitors.

Industrial relations continued to be cordial and harmonious at both the plants and also at the Corporate Office throughout the year.

Discussion on Financial Performance with respect to Operational Performance

During the year under review the financial performance with respect to operational performance was satisfactory and there are no over dues pending from the customers and the interest obligations and statutory obligations have been met in time.

Significant changes in key financial ratios

The details of the Ratios for the Current Year as well as for the previous year is as under:

Reasons for more than 25% Variance in the Ratios:

Current Ratio: Owing to availability of funds through raising of preferential allotment of shares no OD limit was utilised during the last week of March 2024 & enhancement in OD limit was effected from Rs.26.7 Cr to Rs.50 Cr in FY 2025.

Debt-Equity Ratio: TL 5 - Cement Expansion Loan is fully disbursed and OD limit was increased hence, the Borrowings stood at higher side.

Debt Service Coverage Ratio: Term Loan and OD limit were increased and

Margin took a hit owing to low realisations from both Cement and Solar segment owing to less demand and more supply in the market.

Return on Equity Ratio: The reason being low Operating income and enhanced overheads in Current Year.

Trade payables turnover Ratio: The reason being Average trade Payables were increased in the Current Year.

Net capital turnover Ratio: In Current year profits was reduced.

Net profit ratio: Average working capital was reduced in Current year due to higher current portion of Borrowings.

Return on Capital employed: The reason being, in Current year, EBIT was reduced due to lower realisation in Cement.

Return on investment: The reason being, in Current Year the Fair market value of Investment was reduced.

Disclosure of Accounting Treatment

The Company has followed prescribed Accounting Standards in the preparation of its financial statements and there is no deviation in the current year.

Cautionary Statement

Statement in this Management Discussion & Analysis describing the Companys objectives projections, estimates and exceptions are “forward looking statements” within the meaning of applicable laws and regulations. Actual results might differ from those either expressed or implied.