The stage is set for India Cements to turn the corner this year. The performance of this South India-based leading cement maker was dragged down by huge debts that it had run up in the last decade to acquire other cement companies. The company had been reporting losses on account of high interest costs.
It is now ready to shake off this heavy burden by tying up with a Hong Kong-based FII to raise Rs 655 crore through a mix of equity and low-cost debt to refinance its high-cost debts. That should give its bottomline a huge lift.
The move also comes at a time when cement prices have started moving up, particularly in the southern markets, at a fast clip.
The company has managed to tackle its financial woes without selling any part of its huge 7.7Mta capacity or sale of its earlier acquisitions like Visaka Cements, Sri Vishnu Cement or Raasi Cements.
The company has gone for fund raising after it received an approval from the corporate debt restructuring (CDR) cell a couple of years back, which extended it many concessions and interest waivers. Also the company has managed to show improved operational performance and lower losses than in the Q3 last year, pointers to a turnaround in the near future.
Higher volumes together with improved sales realisation helped the company to post operating profits of Rs 32.45 crore in Q3, showing a growth of almost 49.2% over the comparative quarter of last financial. This shows that the operating performance is improving significantly.
This ensured that the company managed to cut net loss to Rs 33.31 crore in Q3 compared with Rs 37.46 crore loss it incurred in the comparative period last year.
The outlook for the cement sector has improved significantly and cement prices have firmed up in southern parts of the country. With higher volumes and better realisation, India Cements is expected to gain significantly in the last quarter of the current fiscal.