India Cements Ltd Management Discussions

OVERVIEW OF THE ECONOMY:

In Fiscal Year 2025 (FY25), the Indian economy is projected to grow at 6.4%. This growth is driven by strong private consumption, robust investment and growth in key sectors like agriculture, industry and services. Indias economic outlook for 2025 and 2026 remains one of the brightest among major global economies, as highlighted by the IMF. Despite global uncertainties and downward revisions in growth forecasts for other large economies, India is set to maintain its leadership in global economic growth. Supported by strong fundamentals and strategic government initiatives, the country is well-positioned to navigate the challenges ahead. With reforms in infrastructure, innovation and financial inclusion, India continues to enhance its role as a key driver of global economic activity. The IMFs projections reaffirm Indias resilience, further solidifying its importance in shaping the global economic future.

SECTORAL PERFORMANCE:

Infrastructure: In FY25, the Indian infrastructure industry is characterizedbyrobustgovernmentinvestment,significantprivate sector participation and a focus on key areas like roads, railways, and ports. The 2025 Union Budget allocated a substantial amount to infrastructure, reflectingthe governments commitment to driving economic growth through infrastructure development.

PPP models are increasingly used in infrastructure projects, attracting private sector investment and expertise. The National Highways Authority of India (NHAI) is actively promoting infrastructure development through initiatives like the Bhoomi Rashi

Portal and the Parvatmala Pariyojana. The capital outlay for railways has been increased, reflecting the governments focus on improving railway infrastructure and capacity. Improvements in port capacity and operational through PPP projects and other initiatives, such as the Vadhavan Port Project. The government is promoting the development of logistics infrastructure through initiatives like Bharatmala Pariyojana and the development of multimodal logistics parks. The Smart Cities Mission (SCM) is driving urban infrastructure development, with a focus on smart technologies and sustainable practices. Core infrastructure sectors like power, oil and gas and coal showed growth, albeit at a lower pace than the previous year. The governments commitment to FDI in the infrastructure sector and other policy reforms is crucial for attracting investment. While challenges exist, the overall outlook remains positive, with the governments commitment to further development and the increasing role of the private sector driving growth in the sector.

Construction: In FY25, the Indian construction industry is projected to see a 8-10% growth, which is lower than previous years 12-15% growth. This slowdown is attributed to factors like the Model Code of Conduct in Q1 and an elongated monsoon. Despite the moderation, the sector is expected to benefit from government infrastructure initiatives and increase in capital expenditure to $133 billion (3.4% of GDP). Government initiatives and investments, particularly in infrastructure and capital expenditure, are expected to continue supporting the sector.

Housing: In FY25, the Indian housing sector is showing signs of both growth and moderation. While luxury housing is experiencing strong demand and sales, the overall market is expected to see a slowdown in growth compared to the previous year. Factors like falling interest rates, favorable affordability, and a large number of new launches are supporting the sector, but growth rates are likely to moderate. The luxury segment is thriving, driven by high-net-worth individuals and non-resident Indians. Sales value in the first half of FY25 rose by 18% to 279,309 crore.

CEMENT INDUSTRY:

The cement industry is expected to see a 7-8% growth in FY25, driven by strong demand in infrastructure and housing. The second half of FY25 saw a better demand, particularly from infrastructure and housing projects. Major players are expanding capacity, particularly in the Southern and Eastern regions. Cement prices experienced a decline in the first half of FY25, primarily due to weak demand and increased competition. However, prices have shown sequential improvement in recent months, driven by increased constructionactivities.Thecementsectorsaw significantincrease in mergers and acquisitions in FY24, with the highest level of activity since FY14. Increased government spending on infrastructure and large-scale housing projects is expected to boost cement demand and capacity growth. Companies are increasingly incorporating environmental, social, and governance (ESG) factors into their strategies to address climate change.

COMPANY PERFORMANCE:

On 24^th December 2024, the Company became a subsidiary of UltraTech Cement Ltd. On change of control, finances of the Company improved significantly. CARE Ratings upgraded long-term rating of the Company from CARE BB+ to CARE AAA and short-term from CARE A4+ to CARE A1+. The Company pruned its borrowing and refinancedhigh-cost debt, resulting in significant reduction in finance cost. In fourth quarter of FY25, performance of the Company improved significantly. The Company achieved capacity utilisation of 73% and reported positive profit before interest, depreciation and tax (PBIDT).

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

	2024-25	2023-24	Increase / (Decrease)
Clinker production	66.25	67.94	(2%)
Cement Production	89.80	94.31	(5%)
Cement & Clinker sales	89.77	94.57	(5%)

Cement realisations remained under pressure during the year. Energy prices remained range bound during the year. New levies on mining and power by various state government impacted cost.

GOING FORWARD:

The Company is in the process of finalizingexpansion / modernization program. Thrust will be on energy conservation, increasing the share of renewable power, waste heat recovery and overall cost optimization. Debt on the Companys balance sheet has come downsignificantly.TheCompanycompletedrefinancingof the remaining debt at significantly lower cost and will benefit from the lower interest burden. Synergy with its holding company will lead to economies of scale and a wider distribution network resulting in profitablegrowth. The Company is poised to grow stronger with an increase in sales, optimizationofcostsandefficient 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:

Effective risk management is critical and essential for the success of any enterprise and the Company has a robust risk management

Policy and framework to mitigate these risks. The Risk Management Committee of the Board and the Board itself regularly review and discuss the various risks associated with the business, its operations and suggest measures for mitigating the risks.

MARKET RISKS:

The market risk consists of lower demand, competitive pressures, lower realisations, etc. The Company focuses on building its brand, superior product quality and competitive cost structures to withstand these challenges. Brand strength of its parent, its wider distribution network and quality control processes are helping the company in mitigating these risks. The Company is taking various steps to control cost like waste heat recovery, use of more renewable power, process modification, etc.

ENVIRONMENT:

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 equipments for controlling ^{the emissions of CO}2^{, SO}x ^{and NO}x ^{and other green gas emissions to ensure a sustainable environment. All the pollution control} equipments 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.

FUEL AND RAW MATERIAL SECURITY RISK:

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, etc. The availability of quality raw material and fuel at affordable price 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 valid through 2030 to 2050 and has got long term contract for supply of fly ash and other raw material from the nearby sustainable sources.

On the power front, while 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.

LOGISTICS COST:

Logistic cost is the key driver of profitability and in addition to fuel prices, lead distances also impact the logistic cost. To mitigate this risk, the Company is increasing use of rail. Synergy with Ultratech will help the Company in reducing the lead distance and will increase its transporter base. Further, this will also help in reducing cost by optimum logistic planning by minimising empty load running of the vehicles.

CYBER SECURITY RISK:

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 sufficientback up system for critical servers together with firewalls have been 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 and 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:

The health and safety of our employees and all our stakeholders are paramount and the Company is totally committed to

"Safety First" mantra in all its activities.

As a Company with more than 75 years of existence, the Company has evolved systems over a period to ensure a robust

Safety Management practice across all its units and is subject to changes according to the level of automation that are taking place.

The Company has implemented rigorous safety procedures and has fostered a culture of accountability with safety committees being formed with representatives from various units, management and from the workers who periodically visit other plants and conduct safety audit and suggest improvements.

Various safety awareness programmes have been initiated to inculcate a sense of belonging and integrate safety culture among all employees and contract workers with robust safety procedures.

The Company has developed a Safety, Health and Environment Policy (SHE) which covers all aspects in this regard and which is the tool to drive safety programmes across the Company.

SHE policy covers extensively its objectives, ownership, accountability for the health and safety of all its constituents and it covers the risk involving right from receipt of materials in handling, storage, plant operations, mining operations, hot meal handling, protocols of working at heights, etc.

Safety audits are also conducted by outside agencies who impart training on safety practices.

The company is committed to maintain a zero harm/zero accident at all its plants through proper safety protocols.

As far as health and welfare of the employees is concerned, the Company has created adequate facilities for improving the morale of the employees including clubs and various sports activities at its plants.

All plants have been provided with safety medical facilities including ambulance and primary hospital.

In addition to safety prayers daily, safety week celebrations at factory and mines are also being conducted along with awards for maintaining best safety practices.

The Company also conducts periodic health check-ups for its employees and provides adequate personal protection equipments.

ENVIRONMENT AND SUSTAINABILITY:

Sustainability is the core element in the business of the Company with constant focus on ensuring a circular economy on climate, energy and environment.

As part of sustainability, the Company always tries to improve the operating efficiencies

It is important to note that the company is the first to get license for blended cement production in the country marking its presence in carbon emission reduction very early.

Various steps taken by the company towards environment and sustainability include improving green area in the plants, in and around its locations, ensuring reduction in green gas emissions, ensure water conservation and community development to ensure a sustainable environment.

Through its CSR activity, the Company concentrates on specific areas of water conservation by diverting the surplus water from its mines through huge investments on pipelines for recharging the nearby village ponds and have created ponds in its exhausted mines for agricultural development.

The Company is also the forerunner in putting up a Waste Heat Recovery System (WHRS) at its Vishnupuram plant. Plan is to put WHRS at other plants also.

The Company actively contributes to the circular economy by diverting the waste materials into cement manufacturing process from other industry which include fly ash, slag, chemical gypsum, wet ash and alternate fuels including plastic waste, biomass, etc.

Increase in proportion of blended and slag cement for further reduction in carbon emission.

^{The Company has also altered the fuel and raw mix in such a way to ensure the emissions and SO}x ^{and NO}x ^{are controlled} and well within limits.

As part of water conservation, the company has been re-cycling the wastewater after treatment from Sewage Treatment

Plants for gardening and other factory purposes.

The steps taken by the Company regarding environmental, social, etc are all detailed in the Companys website under ESG section.

The Company is in the process of investing in a SPV for installing 15 MW Wind-Solar Hybrid Power facility for its Banswara plant.

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, 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 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 floorlevels with awards and recognitions every quarter. The Company is now part of Aditya Birla Group and is in the process of rolling out the best practices and policies for employee wellbeing. The overall permanent employees on the rolls of the Company was 1719 (previous year - 1875) at the end of the year.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has got strong internal control systems commensurate with size and scale of operations and have a well-defined organisation structure defining the procedures and internal financial controls are also in place. We have also built in policies and procedures to ensure adequate disclosure to safeguard our assets. The Risk Management Committee also periodically reviews and suggest ways for improving the systems and procedures to ensure highest corporate governance. The internal audit is carried out by a team of professional firms whose functions are defined through internal audit, process audit, stock audit, to name a few.

The detailed annual audit plans are rolled out after approval by the Audit Committee. 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.

The Company has a strong system of budgetary control which covers all aspects of operations, finance, capital expenditure at micro level and on a monthly basis reported directly to top management. All the physical performances and efficiency parameters are monitored on a daily basis and actions are taken immediately. The Company has an Audit Committee of Directors to review financial statements to shareholders. The role and terms of reference of the Audit Committee cover the areas mentioned

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 177 of the Companies Act, 2013 besides other assignments referred to by the Board of Directors from time to time.

The Company is implementing SAP and other MIS tools for further strengthening and monitoring of internal controls.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

HIGHLIGHT OF FINANCIAL PERFORMANCE	Crores
	2024-25	2023-24
Net Sales / Income from operations	4,088.47	4,942.43
Other Income	50.27	54.33
Total Income	4,138.75	4,996.76
Total Expenditure	4,471.17	4,833.45
Operating Profit	(332.42)	163.31
Operating Margin %	(0.08)	0.03
Interest & Finance Charges	276.65	240.44
Depreciation	239.43	219.63
	Crores
HIGHLIGHT OF FINANCIAL PERFORMANCE
	2024-25	2023-24
Profit / (Loss) before Exceptional items	(848.50)	(296.76)
Exceptional items	54.13	42.09
Profit / (Loss) before tax	(794.37)	(254.67)
Tax Expenditure / Deferred Tax/MAT	(126.81)	(52.15)
Profit / (Loss) after tax	(667.56)	(202.52)

Performance of the Company was impacted by subdued Cement prices and constrained working capital. Performance improved in last quarter after takeover by UltraTech on the back of better volumes and higher capacity utilisation

Key Financial Ratios:

Ratio	Basis	2024-25	2023-24	% change*
Debtors Turnover (Times)	Revenues from Operations / Average Trade	6.05	6.56	(8%)
	Receivables
Inventory Turnover (Times)	Revenue from Operations / Average Inventory	6.94	7.08	(2%)
Interest Coverage Ratio (Times)	Profit before Finance Cost & Tax / Finance Cost	(4.13)	(0.23)	(1696%)
Current Ratio (Times)	Current Assets / Current Liabilities	1.01	0.94	7%
Current Ratio - excluding Current Maturities (Times)	Current Assets / Current Liabilities excluding current maturities	1.05	1.23	(15%)
Debt to Equity Ratio - excluding short term borrowings and current maturities (Times)	Non-Current Borrowings /Total Equity	0.11	0.26	58%
Debt to Equity Ratio - including short term borrowings and current maturities (Times)	Short term + long term debt + other fixed payments / Shareholders Equity	0.16	0.48	67%
Operating Profit Margin (%)	EBIDTA/Total Income	(8.03%)	3.27%	(346%)
Net Profit Margin (%)	Net Profit after tax/Total Revenue	(16.13%)	(4.05%)	(298%)
Return on Net worth (%)	Profit after tax/Average Shareholders Equity	(8.89%)	(3.68%)	(142%)

* Figures in (-) represents adverse change Significant losses due to lower prices and volume resulted in lower interest After takeover by UltraTech, the Company reduced debt substantially and at the same time revalued its assets, resulting in better debt equity ratio. Returns ratios i.e. Operating profit margin, Net profit margin and Return on Net Worth were impacted negatively due to significant losses incurred by the Company during 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, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.