India Cements has indicated that it has been taking the right measures to meet its commitments and maintain liquidity in the face of unprecedented challenges as the company posted a significant loss in the September 2022 quarter on account of continuing cost pressures.

The company has been facing a spiralling increase in the prices of input materials such as coal and a spike in energy costs. Such increases have rattled its performance as it has been struggling to pass on the cost increases due to the huge supply overhang in the southern region.

Prices to go up

India Cements reported a net loss of ₹138 crore for Q2 FY23, compared with a net profit of ₹22 crore in the year-ago quarter. Continuous increases in the cost of production on account of a spike in coal, fuel prices, rise in the cost of other materials and rupee depreciation pulled down the company’s profitability.

N Srinivasan, Vice-Chairman & MD, said for the first time in its history, the company was hit both on the cost and price fronts. The company would resort to price increases in the coming months to compensate for the cost increases. “I expect the cement prices to go up to offset cost increases,” he added.

But, according to Srinivasan, the company could forecast the upcoming challenges on the cost front and had taken some right measures to combat the same. It had to sell Springway Mining in Madhya Pradesh which had a mining lease for more than 100 million tonnes of limestone to ensure a better liquidity position.

“I didn’t go to the bank. I didn’t flounder. We took steps to protect the company as coal prices continued to move northwards. With the sale of the MP company, our liquidity will get better. We will use the money for repayments and improve our current ratio, while the rest of the sum will be kept as reserve. I think it’s a very good foresight to see the future scenario,” said Srinivasan.

He also asserted that India Cements had enough assets that it could sell if needed. “There is no question of liquidity problem for us,” he added.

The company’s total debt was ₹2,350 crore as of September 30, and it has repayment commitments of ₹250 crore for H2 of the fiscal. It has stopped producing power from its captive thermal power units due to the high cost of coal and has been sourcing power through exchanges.

India Cements expects the prices to be firm in the coming month and demand to pick up from April 2023 onwards.

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