Sagar Cements Limited (SCL) is an established cement manufacturing company with a significant operational footprint across Southern, Western, and Eastern India. Headquartered in Hyderabad, Telangana, the company operates multiple production facilities strategically located to serve key markets. Its manufacturing plants are situated in Mattampally (Telangana), Bayyavaram and Gudipadu (Andhra Pradesh), and Jajpur (Odisha). Through its subsidiary, Andhra Cements, it also operates a plant at Dachepalli (Andhra Pradesh), and it has a unit in Jeerabad (Madhya Pradesh). The company is focused on strengthening its regional presence through both organic growth and strategic acquisitions, such as that of Andhra Cements. Management is actively pursuing operational excellence by implementing cost-reduction initiatives, including waste heat recovery systems (WHRS) and solar power capacity, to improve efficiency and profitability. The company is publicly listed on both the National Stock Exchange (NSE) and the BSE Limited (BSE).

Official Website: http://www.sagarcements.in/

• Q3 FY26 Performance:

• Revenue: Stood at ₹591 crore, a 5% increase compared to ₹564 crore in Q3 FY25.

• EBITDA: Remained flat year-on-year at ₹38 crore.

• EBITDA per Tonne: Recorded at ₹254.

• Net Result: Reported a Loss after Tax of ₹64 crore.

• Balance Sheet as of December 31, 2025:

• Gross Debt: Totaled ₹1,627 crore, comprising ₹1,320 crore in long-term debt and the remainder as working capital. The net debt is expected to be around ₹1,450 crore by the end of FY26.

• Net Worth: Stood at ₹1,694 crore on a consolidated basis.

• Debt-to-Equity Ratio: Stands at a manageable 0.78:1.

• Cash and Bank Balances: Amounted to ₹83 crore.

• Key Cost Metrics (Q3 FY26):

• Power and Fuel Cost: ₹1,408 per tonne, a slight improvement from ₹1,456 per tonne in Q3 FY25.

• Freight Cost: ₹830 per tonne, largely stable compared to ₹835 per tonne in Q3 FY25.

The company maintained stable EBITDA in Q3 FY26 despite market challenges, though it posted a net loss, while keeping its debt-to-equity ratio below 1.

• Demand Environment:

• Overall demand in Q3 was subdued during the first half of the quarter due to extended monsoons and the festive season.

• A strong demand uptick was witnessed towards the end of the quarter and has continued into January 2026.

• Regional Demand Outlook (FY26):

• Andhra Pradesh & Telangana: Expected to see high single-digit growth.

• Tamil Nadu: Flat to marginal positive growth is anticipated.

• Karnataka: Growth is projected in the range of 3% to 5%.

• Management confirms these forecasts, previously discussed, remain valid and could even be slightly better given the recent strong demand.

• Pricing Trends:

• Price increases began from mid-to-late December.

• Non-Trade Segment: A price hike of ₹15 to ₹20 has been realized across most operating states. In Madhya Pradesh, a ₹10 hike occurred earlier, at the end of November.

• Trade Segment: An attempted increase of ₹15-₹20 in January has only resulted in a realized hike of ₹5 to ₹10 so far, impacted by the Pongal festival period.

The cement industry is experiencing a strong demand recovery post-monsoon, allowing for price hikes, particularly in the non-trade segment.

• Q3 FY26 Volume Growth: The company registered a volume growth of 8% year-on-year.

• FY26 Volume Guidance:

• The full-year sales volume target is 6 million tonnes.

• This translates to a year-on-year growth of approximately 9%.

• FY27 Volume Outlook:

• The initial outlook for the next financial year is a sales volume of 7 million tonnes.

Sagar Cements is on track for high single-digit volume growth in the current fiscal year and is targeting continued momentum into FY27.

• Land Monetization:

• The company is in the final stages of preparing its Vizag land parcel for monetization, pending a final government policy.

• The land is valued at a government reckoner rate of ₹4 crore per acre, translating to a total potential value of ₹400 crore.

• Net proceeds, after expenses and capital gains tax, are estimated to be around ₹350 crore.

• Monetization Strategy & Timeline:

• The monetization process is expected to occur over the next 18 months.

• The land will likely be sold in five to six smaller lots to match the absorption capacity of the Vizag real estate market.

• Use of Proceeds:

• The primary use of the funds will be to retire debt, supporting the company's plan to maintain an optimized and balanced debt structure.

A significant opportunity exists to unlock approximately ₹350 crore in cash through land monetization over the next 18 months, which will be used for deleveraging the balance sheet.

• Plant Utilization (Q3 FY26):

• Jeerabad: 95%

• Gudipadu: 82%

• Bayyavaram: 66%

• Mattampally: 57%

• Jajpur: 40%

• Dachepalli (Andhra Cements): 39%

• Capital Expenditure (Capex):

• FY26: Total planned Capex is ₹489 crore, with ₹303 crore spent in the first nine months and ₹186 crore budgeted for Q4.

• FY27: Budgeted Capex is significantly lower at ₹291 crore, as major projects conclude.

• Ongoing Projects & Commissioning Timelines:

• Andhra Cements (Dachepalli): The new 6-stage preheater has been successfully commissioned. The cement capacity addition is expected by August 2026.

• Gudipadu: The 4.35 MW Waste Heat Recovery (WHRS) project is expected to be commissioned by the end of FY26.

• Jeerabad: The grinding capacity expansion from 1.0 MTPA to 1.5 MTPA is expected to be commissioned in the early part of Q1 FY27.

The company is operating its key plants at healthy utilization rates and is nearing the completion of its current Capex cycle, with new capacities set to come online over the next few quarters.

• Medium-Term Goal (Post-FY27):

• The company has a medium-term objective to expand its capacity to 12 million tonnes, with a further goal of reaching 15 million tonnes.

• The next major phase of Capex for this expansion is not expected to begin until the end of FY28 or early FY29.

• Immediate Financial Strategy (Next 2.5-3 Years):

• With no large Capex planned, the focus will be on deleveraging.

• Internal cash flows, supplemented by proceeds from the Vizag land monetization, will be used to retire debt.

• The objective is to bring the debt-to-equity ratio down towards 0.5x in the next 18-24 months.

The company's immediate future is focused on balance sheet strengthening through debt reduction, postponing major new capacity expansion plans for at least two to three years.

• EBITDA Per Tonne Trajectory:

• Q3 FY26: ₹254 per tonne.

• 9M FY26: Approximately ₹478 per tonne.

• Q4 FY26 (Forecast): Expected to be in the range of ₹500 to ₹550 per tonne, factoring in some, but not all, of the recent price hikes.

• FY26 (Full Year Target): Aiming for ₹500 to ₹525 per tonne (including incentives).

• Cost Reduction Initiatives:

• Andhra Cements: The new preheater has already improved specific fuel consumption from 850-880 Kcal to sub-720 Kcal and electrical consumption from 60-62 units to 51 units (up to clinker). The plant is expected to break even in the current quarter.

• Gudipadu WHRS: The 4.35 MW plant is expected to result in a net saving of ₹100-₹125 per tonne at the unit.

• Jeerabad Expansion: The new grinding mill should provide operating leverage and save a minimum of ₹150-₹200 per tonne on fixed costs.

• Fuel Cost Outlook:

• Management does not expect any significant increase in power and fuel costs for the remainder of FY26.

• An early estimate for FY27 suggests a potential 2-3% increase in fuel prices.

Profitability is expected to improve in Q4 FY26, driven by better pricing and operating leverage, with ongoing cost-saving projects set to further support margins in the coming year.

• Upcoming Capacity Additions:

• Management is not expecting significant new capacity to come online from peers in the next six months.

• Within the next financial year, two key assets are expected in Andhra Pradesh:

• Ramco Cements' Line-2 at Kolimigundla.

• UltraTech's Line-4, though the exact timing could be in the next financial year or a quarter later.

• Mergers & Acquisitions (M&A):

• Management has not observed any major M&A activity or intensity in the last six months.

• The assumption is that the M&A environment will remain subdued for the next few quarters.

The competitive landscape in the company's key markets is expected to see new capacity additions from major players within the next fiscal year, though the M&A scene appears quiet.

• Fuel Mix Strategy:

• The company has actively shifted its fuel mix, moving from pet coke to domestic and imported coal to mitigate rising costs.

• The removal of the ₹400 coal cess has made domestic coal more competitive relative to pet coke.

• Inventory Management:

• The company has reduced its fuel inventory holding period.

• Previously holding inventory for two quarters ahead, it now operates with a more agile one-quarter-ahead inventory policy.

• Product Mix:

• The company's product mix is 55% Ordinary Portland Cement (OPC) and 45% blended cement. This higher proportion of OPC, which is more energy-intensive, can make cost structures appear higher on a per-tonne basis compared to peers with a higher blended cement ratio.

Management is actively managing its fuel sourcing and inventory to control costs, while its product mix remains skewed towards energy-intensive OPC.