Ind-Ra affirms Sagar Cements credit rating with stable outlook

India Ratings and Research (Ind-Ra) has affirmed credit rating for the company's bank facilities, as 'IND A-', with a stable outlook.

In Q1FY21, the company’s realisation per tonne grew to Rs 4,756 supported by price rise across India. The company’s operating profitability has also improved, led by lower input costs (power and fuel), a decline in pet coke prices, lower freight, and logistics costs.

In August 2019, the company had commissioned its entire power plant (61.55 MW capacity) which in turn, made the company fully self-reliable in terms of its power consumption.

Looking at the volume mix, it stood at Andhra Pradesh-34 per cent, Telangana-25 per cent, Tamil Nadu-12 per cent, Karnataka-11 per cent, Maharashtra-9 per cent and Odisha-8 per cent.

The company has also focussed on capacity expansion to expand its geographical reach. In May 2019, it had acquired Satguru Cements and it is setting up one MTPA cement plant in Madhya Pradesh at a cost of Rs 488 crore.

Besides, to further expand in the Eastern region, the company had acquired Jaipur Cements in May 2019 to set up a grinding unit with 1.5 MTPA capacities at a cost of Rs 308 crore.

These acquisitions would enhance Sagar Cements’ total capacity to 8.25 MTPA from 5.75 MTPA. However, due to the COVID-19 pandemic, there is a scarcity of labour, which would further cause a delay by six months. Due to these expansions, the company’s cash flow is likely to remain negative over FY21-22.