# 1. Financial Performance ## A. Key Figures * **Revenue:** **₹3,417 Cr** (+7% YoY) * **EBITDA:** **₹696 Cr** (+60% YoY) · **₹1,013/ton** (+55% YoY) * EBITDA Margin: 20.4% Q2 FY'26 (vs. 14.1% prior year) * **Net Debt:** **₹1,602 Cr** · **Gross Debt:** **₹6,621 Cr** * **Volume:** **13.9 Mn tons** H1 CY (vs. 29.4 Mn tons full-year prior) ## B. Revenue & Volume * **Pricing Power:** Revenue growth driven by strong double-digit realization gains and mid-single-digit volume expansion. * **Volume Trajectory:** H1 volumes reflect a healthy run rate against prior full-year base, indicating sustained operating momentum. ## C. EBITDA & Margins * **Margin Leap:** EBITDA margin nearly quintupled YoY, marking a sharp inflection in profitability despite seasonal QoQ decline. * **Sustained Strength:** Second consecutive quarter of four-digit EBITDA per ton, underpinned by improved price positioning across markets. ## D. Debt & Liquidity * **Balance Sheet Resilience:** Net debt increase attributed to mark-to-market decline in IEX shares, not operational deterioration. * **Leverage Guidance:** Net debt/EBITDA expected to remain **below 2x**, with management firmly committed to cap leverage at **2 times**. --- # 2. Volume & Realization Trends ## A. Key Figures * **Trade Sales Share:** **62%** (Q2, ~4-year low) * **Premium Product Share:** **22%** (flat YoY and QoQ) ## B. Market Share Strategy * **Profitability Over Share:** Growth approach is micro-market-specific, prioritizing **profitable growth** over uniform market share targets, with margin preservation favored in high-utilization regions. * **Resilient Pricing:** Cement prices held firm in Q2 despite adverse weather and low single-digit industry growth, underscoring strong demand fundamentals. * **Strategic Volume Trade-off:** The company made deliberate choices to balance realization and profitability, though it did not confirm explicit market share sacrifice. ## C. Premium Product Mix * **Flat Premiumization:** Premium product mix remains unchanged, with no meaningful shift toward higher-value products despite stable ASPs and market conditions. * **ASP Pressure Explained:** Headline ASP decline attributed to **product mix shifts**, even as average market prices remained flat. ## D. Trade vs Non-Trade Sales * **Trade Share Dip Not Strategic:** Q2 trade sales at 62%—a multi-year low—reflects minor fluctuation, not a structural pivot; management downplays significance and sets no trade mix targets. * **Full GST Pass-Through:** October pricing reflects complete transfer of GST benefits to customers, aligning with prior commitments. --- # 3. Capacity & Project Progress ## A. Key Figures * **New Cement Capacity:** **12 MTPA** (Belgaum & Kadapa) * **Renewable Energy Consumption:** **48%** of total (Q) · **93 MW** RE commissioned * **RE Capacity Target:** **576 MW** operational by FY '26 * **Project Costs:** **₹3,200–3,800 Cr** per Belgaum/Kadapa · **~₹5,000 Cr** for Jaisalmer * **Clinker Line Capacity:** **3.6 MTPA** (Umrangso, Assam) ## B. Greenfield Expansions * **Execution on Track:** All major greenfield projects (Belgaum, Pune, Kadapa, Assam) progressing on schedule, with trial runs underway in Umrangso and no delays reported. * **Jaisalmer & NE Expansion Timeline:** Groundbreaking targeted by **March 2026**, pending **JP transaction outcome**; further updates expected by then. * **CAPEX Visibility:** Significant capital allocated to growth, with **Assam, RE, and maintenance** representing additional outflows beyond the ₹12,000 Cr core expansion plan. ## C. Clinker & Grinding Units * **Northeast Integration Play:** Umrangso clinker line trial underway, with **commercial production expected in Q3 FY'26**, enabling future **split grinding expansion** in high-growth Northeast and East markets. * **Grinding Capacity Flexibility:** Recent 24 MTPA addition in Northeast; next-phase split GU decision deferred until utilization ramps, with clarity in **a few quarters**. ## D. FY28 Capacity Target * **75 MTPA Goal Intact:** Target remains unchanged, with a **5 MTPA gap** to be filled via **organic execution and inorganic opportunities**, notably the **JP acquisition**. * **Capital Efficiency Focus:** Full 70 MTPA build-out estimated at **₹15,000–16,000 Cr**, reflecting disciplined cost management across large-scale expansions. --- # 4. Cost & Input Trends ## A. Key Figures * **Raw Material Cost per Ton:** **₹799/ton** (+1% YoY) * **Power & Fuel Cost per Ton:** **₹1,017/ton** (+1% YoY) * **Logistics Cost per Ton:** **₹1,060/ton** (–8% YoY) * **Blended Fuel Cost:** **~$100/ton** (stable QoQ) * **Cost of Borrowing:** **6.9%** (down due to benchmark-linked loans) * **Incentive Accrual (H1 FY'26):** **₹138 Cr** (collections: ₹91 Cr) * **CAPEX Reduction:** **₹3,000 Cr** (due to improved supplier credit terms) ## B. Fuel & Raw Material Costs * **Stable Input Inflation:** Raw material and power/fuel costs rose only marginally YoY despite Tamil Nadu mineral tax, aided by dynamic fuel mix optimization between coal and pet coke. * **Fuel Cost Discipline:** Blended pet coke and coal costs held flat QoQ; company actively shifting toward cheaper coal amid divergent price trends. * **Regulatory Tailwinds:** Removal of coal cess to deliver **₹40 Cr benefit in FY'26**, rising to **₹50–55 Cr in FY'27**, with **₹20 Cr savings expected in H2**. ## C. Logistics & Freight Savings * **Structural Cost Advantage:** Logistics cost down 8% YoY to record low levels, driven by operational efficiencies and **two-month relief from railway surcharge** (vs. one month prior year). * **Efficiency Gains:** Freight cost per ton fell by **₹80** despite a longer average lead distance, underscoring strong freight management. ## D. Incentive & Compensation Costs * **Incentive Liability Management:** Total outstanding incentives stand at **₹800 Cr**, with catch-up in collections expected in Q3; full-year outgo forecast to decline to **₹240 Cr in FY'26** and **~₹200 Cr in FY'27**. * **Compensation Reform:** Transition from 100% fixed to **variable pay (15–25% of total comp)** for senior/middle management, tied to company, individual, and safety performance. * **Per-Ton Cost De-leveraging:** Incentive cost per ton expected to fall from **₹100 to ₹60–65**, reflecting structural savings and GST impact. --- # 5. Supply Chain & Geography ## A. Regional Demand Outlook * **Resilient Long-Term Growth:** Indian cement demand expected to grow at **7–8% CAGR** this decade, supported by infrastructure-led cycles where short-term volatility typically normalizes over time. * **Near-Term Headwinds:** Current-year demand softened with low-single-digit growth in H1 due to adverse weather and **GST-related inventory destocking** in September. * **Pricing Stability:** Despite monsoon pressures, cement prices remained reasonably stable last quarter, fostering cautious optimism for future price discipline amid improving demand. ## B. Channel Liquidity Impact * **Improved Channel Liquidity:** The **10% excise duty cut** and **GST reductions** have eased working capital burdens, boosting supply chain liquidity and potential volume absorption. * **Sales Composition:** Sales comprised **cement only** (no clinker sales), with a notable share coming from **non-trade channels**, including institutional and government clients. --- # 6. Risks & Cost Pressures ## A. Key Figures * **Pet Coke Price:** **$116/ton** (current level) * **Cost Reduction Target:** **150–200 bps** over two years * **Incentive Accrual Estimate:** **₹240 Cr** (revised down from ₹300 Cr) ## B. Pet Coke Volatility * **Input Cost Pressure:** Elevated pet coke prices driven by geopolitical volatility are creating margin headwinds, but impact is being mitigated through **active variable cost reduction initiatives**. * **Volume Leverage:** Seasonally stronger H2 volumes expected to partially offset per-unit cost pressures from rising fuel and forex costs. * **Sustained Rationalization:** Company remains on track for **multi-year cost improvement**, with structural initiatives offsetting inflationary trends. ## C. GST and Regulatory Shifts * **Pro-Growth Policy Tailwinds:** GST and income tax cuts, along with monetary easing, are expected to stimulate consumption and support a demand recovery in housing and infrastructure. * **Full Pass-Through Enforced:** The **10 percentage point GST reduction on cement** has been fully passed to customers, reinforcing compliance and market stability despite short-term pricing uncertainty. * **Incentive Deferral, Not Loss:** Lower GST has deferred incentive income accruals, but does not represent a permanent erosion, with **revised full-year estimate at ₹240 Cr**. * **Pricing Discipline Over Cycles:** Management refrains from short-term price guidance, emphasizing long-term **cost leadership and pan-India scale** as key competitive advantages amid supply overhang and regulatory shifts. * **Stable Collections:** Despite sectoral concerns on EPC liquidity, **receivables remain well-controlled** with no deterioration in payment cycles. --- # 7. Guidance & Outlook ## A. Key Figures * **H1 FY'26 CAPEX:** **₹1,189 Cr** (actual) · **FY'26 CAPEX Guidance:** **₹3,000 Cr** (revised down) * **FY'27 CAPEX Guidance:** **₹4,000 Cr** (estimated) * **FY'28 CAPEX Outlook:** **₹10,000–10,500 Cr** (projected) + **₹3,500–3,800 Cr** for **6 Cr tons** capacity addition ## B. H2 Volume Expectations * **H2 Demand Recovery Expected:** Improved customer sentiment, strong monsoons, and potential RBI easing for real estate are seen as key catalysts for a pickup in cement demand. * **Cautious Guidance Stance:** Management expects H2 performance to improve versus H1 but refrains from volume guidance due to quarterly unpredictability, despite historical outperformance. * **Volume Ambition Implied:** Company aims to surpass **55 crore tons** in H2 volumes this year, based on prior-year run rate and current momentum. ## C. CAPEX and Funding Plan * **CAPEX Moderation in FY'26:** Full-year spend revised downward to ₹3,000 Cr due to favorable supplier credit and deferral of non-critical projects. * **Steep CAPEX Ramp Ahead:** Out-year plans signal a major expansion phase, with FY'28 spending projected to reach **₹10,500 Cr** to support **6 crore ton** capacity build. * **Funding Clarity Pending:** A more definitive CAPEX roadmap for future years will be communicated by **March 2026**.