India Cements to reduce long-term debt to below Rs 1,000 crore

Company did not feel any impact of demonetisation and demand is expected to increase: MD Srinivasan

The India Cements Ltd has said that it is looking at reducing its long-term debt from the current Rs 1,900 crore to less than Rs 1,000 crore. The company said that it has not witnessed any impact of demonetisation in the cement demand and expects a reasonable growth in the demand owing to the expected thrust in the forthcoming Budget on infrastructure, housing, public spending and developmental works.

"Due to uncertainty in the markets, the company has executed a refinancing of debt, up to around Rs 1,100 crore, resulting in reduction in near term commitments, which has also improved the rating of the company. By the differed repayment, the company has reduced interest by around one per cent and the improvement in rating would make it eligible to do commercial paper that will again reduce the debt," said N Srinivasan, vice-chairman and managing director of The India Cements.

"With the refinancing, we have a rating for Rs 250 crore and we will be planning to issue it when it is needed," he said.

He added that the company is expecting the long-term debt to be down to Rs 1,700 crore by the end of the fiscal and a debt level below Rs 1,000 crore would be comfortable level for the company. It has already repaid Rs 250 crore of debt last year and this year, it has plans to reduce another Rs 250 crore of which Rs 180 crore has been repaid so far. The long-term strategy for a company in cement industry would be to grow with the least debt, he added.

India Cements has posted an increase in net profit to Rs 35.34 crore during the quarter ended December 31, 2016, as compared to Rs 3.16 crore during the quarter ended December 31, 2015. Total income from operations stood at Rs 1270.95 crore during the quarter, as compared to Rs 1066.13 crore during the same quarter of last fiscal year, with an increase of 19 per cent.

The growth was mainly owing to the higher sales volumes and that last year the base was lower. The demand in South has grown to eight per cent during the year, as against four per cent demand in the country overall. Exports also registered a good growth, he said. The company will be looking at expanding its exports to newer countries, he said.

The overall sales volume including clinker and cement exports was up by 22% to 23.59 lakh tonne against 19.37 lakh tonne in the previous year. The interest and other charges were at Rs 86 crore against Rs 94 crore and depreciation was lower at Rs 52 crore, against Rs 55 crore, resulting in an improved bottom line, said the company officials.

The prices were stable in Tamil Nadu and Kerala while Karnataka and Andhra Pradesh also showed positive signs in terms of price stability.

"Reportedly, the liquidity has been gradually restored in the system by the circulation of new currency. The lending rates are also undergoing downward revision. With the expectations of a thrust in the forthcoming Budget on infrastructure, housing, public spending and developmental works, a reasonable growth in the cement demand is envisaged," said the company officials.

Interestingly, cement from Pakistan is also being imported to the country through Thoothukudi and Kochi ports, at a lower price though it is not affecting the larger players. Around 40,000-50,000 tonne of cement is being imported to India in a month and sold at lower prices, said some company sources.