Mangalam Cement Ltd Management Discussions

CEMENT INDUSTRY DEVELOPMENT AND OUTLOOK

The Indian Economy has demonstrated resilience, making a robust growth of 7.6% in FY 24. This increase has been driven with support of strong domestic demand and favourable Government policies, across all sectors, where the construction sector has experienced a growth of 9.6% in FY 24.

The steady progression of the Economy, with a growing population and increasing urbanisation supports the long-term demand for cement across the nation in Infrastructure and Housing sectors. However, a deceleration in volume growth has been noted since the latter half of the current fiscal year, with expectations of this trend persisting over the medium term. Consequently, cement volumes are expected to have a compounded annual growth rate (CAGR) of 7% for FY25 and FY26.

Capacity additions are expected to increase by 30-35 MTPA in FY 2024-25 and currently announced capacities are up to an addition of 140-150 MTPA by FY28 - FY30 crossing total capacity to approx 650 MTPA.

Considering the dynamics between demand and supply and their effect on pricing, a decline in cement prices by 2-3% for FY25 is expected and capacity utilization seems likely to remain under 75% over the medium term, because of capacity addition and intensified competition among industry players across various regions.

The central governments thrust on infrastructure with a plethora of projects in the National Infrastructure Pipeline, step-up budgets along individual state governments efforts to increase capex will drive healthy infrastructure-led demand growth for the cement sector in the medium term. Overall, the change in demand drivers is expected to push infrastructure share in cement demand to about 32%-34% from the current 26%-28% over the medium term.

Infrastructure will provide higher growth with the government focusing on infrastructure spending of 7 11.11 Lakh Crore, through its flagship schemes, such as PM Gati Shakti, rising investments in roads, railways, metros, airports, and irrigation etc.

COMPANY PERFORMANCE REVIEW

• FINANCIAL HIGHLIGHTS (7 in Lakhs)

Particulars	Current Year ended 31st March, 2024	Previous Year ended 31st March, 2023
Net Sales/ Income from operations	1,72,548.09	1,80,158.56
Profit before interest Depreciation and Tax and other Amortisation (EBITDA1)	24,090.41	18,280.37
Less: Depreciation and Amortisation	7,421.30	6,947.22
Expenses Finance Costs	6,758.06	6,615.99
Profit/ (Loss) before Exceptional Items and Tax	9,911.05	4,717.16
Less: Exceptional Item	NIL	1,945.09
Profit/ (Loss) before Tax	9,911.05	2,772.07
Less: Tax Expenses (net)	3,939.39	1,059.77
Net Profit for the year	5,971.66	1,712.30
Other Comprehensive Income (net of tax)	(19.76)	103.87
Total Comprehensive Income (after tax)	5,951.90	1,816.17
Earning Per Share (EPS)	21.72	6.23
P/E Ratio	33.66	42.60

Your Company has produced 3.38 Million MT of cement as compared to 3.46 Million MT in the previous year and registered a decrease of 2.31 % in volume.

Revenue from Operations decreased by 4.22% from 7 1,80,158.56 lakhs in the previous year to 7 1,72,548.09 lakhs in the current year.

Profit before depreciation and tax increased by 7 5,667.97 lakhs from 7 11,664.38 lakhs in the previous year to 7 17,332.35 lakhs in the current year.

Net Profit of the Company increased by 7 4,259.36 lakhs from 7 1,712.30 lakhs in previous year to 7 5,971.66 lakhs in the current financial year. The increase in net profit is primarily due to reduction in power and fuel prices.

• Production in MMT

Particulars	FY2024	FY2023
Clinker	2.60	2.40
Cement	3.38	3.46

Clinker production increased by 8.33% in comparison to previous year and production of cement decreased by 2.31 % in comparison to previous year.

• Cement Sales and Dispatch Volume in MMT

Particulars	FY2024	FY2023
Sales Volume	3.36	3.46
Dispatch Volume	3.36	3.46

• Power and Coal Consumption

Particulars	FY2024	FY2023
Power Consumption (Per MT of Cement)	69 kwh	71 kwh
Coal Consumption (Per MT of Clinker)	106.42 Kg	103.97 Kg

• Power generation

Particulars	FY2024	FY2023
Captive Thermal Power Plant	1,162.95	1,048.22
Wind Turbines	153.91	150.25
WHRS	721.38	695.28

The overall performance of the Company has improved on many parameters and was satisfactory.

During the FY 23-24, fuel prices have softened contributing to a significant cost reduction alongwith cost optimization steps taken by the Company at various levels.

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

We have also achieved around 50% Bio-diesel use replacing Diesel in our vehicles at our plants and mines.

MCL has started using battery operated Electric Vehicles (EVs) in handling operations at Plant and is planning to introduce EVs for inbound/outbound Logictics.

MCL is actively implementing initiatives to rationalise its logictic costs, focussing on sustainability and cost reduction in logistics by optimising 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:

Purpose	Initiative
Strenthing operational efficiency	Cement Network Operations
Supply chain optimisation	Go Direct distribution
Boost dispatch capacity	Agile and Automated Logistics Infrastructure
Overall Operational Improvement	Digital Transformation at all leve
Improve cost-effectiveness and profitability	Commercial Excellence

MDF division of the Company has improved during the financial year 2023-24 as compared to previous financial year and it is expected that MDF division would do better in financial year 2024-25.

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

ENVIROMENT, 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 planted over 8,379 saplings to ensure a dense green belt around the plant and mine areas. Company encourages its employees and their families to actively participate in its plantation drives.

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

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Activities	Total No. of Examination(s)
OPD Consultation	25,023
Silicosis Screening Camps	330
Guest house worker Health Check Up	26
Canteen worker Health Check Up	40
Staff / Worker / Contract Labour - Periodical Health Check Up	1,776

In your Company safety is of utmost importance and a culture of safety is a necessary requirment, not just for the Companys staff but also for contract workers, raw material suppliers and transporters 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 organisation.

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 favourable policies and regulations that have strengthened business sentiments. With increased population, surged need for housing, moderating inflation, stabilising 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 suppliers to ensure consistent supply. Besides, the Company has undertaken various technological initiatives to optimise raw materials usage and enhance productivity.

Competition risk: Increasing cement players within the industry may impact realisation 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 realisations 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 customers, 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 specialised 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 phising and ransomwares, unavailability of system. Protection of data and cyber security has become a key concern for comapnies. The Company uses SAP EPR 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:

• Effectiveness and efficiency of operations

• Adequacy of safeguards for assets

• Prevention and detection of frauds and errors

• Accuracy and completeness of the accounting records

• 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 auditors. 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 programmes 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 1,031 permanent employees, as on 31st March, 2024.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

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

Ratios	FY 23-24	FY 22-23	% Change
Interest Coverage Ratio	2.47	1.42	73.94
Debt Equity Ratio	0.75	0.82	-8.54
Operating Profit Margin Ratio	13.96	9.07	53.91
Net Profit Margin	3.46	0.95	264.21
Inventory Turnover Ratio	6.11	7.79	-21.57
Current Ratio	0.85	0.86	-1.16
Debtor Turnover Ratio	48.28	48.69	-0.84

Explanation for change in the ratio by more than 25% : Due to

increase in profit during the year.

RETURN ON NET WORTH

	FY 23-24	FY 22-23	% Change
Return on Net worth	7.36	2.26	225.66

The return on networth as on 31 st March, 2024 has increased to 7.35% in current 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 security 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 factors 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 factors 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.