Chennai-based The India Cements Ltd. (ICL) is in discussions with prospective buyers to hive off 600 acres of land to beef up its short-term liquidity positions.
Indicating this, N. Srinivasan, Vice-Chairman and Managing Director, said the sale could fetch the company around Rs. 1,200 crore.
The company has plans for improving the liquidity in the short-term through disposal of some non-core assets. Simultaneously, steps are being taken to improve the operating parameters through refurbishment of some of the plants,’’ he said.
The company has a land bank of 26,000 acres. ICL has a debt of around Rs. 3,000 crore. The company had earlier indicated that it would repay debt to the tune of Rs.500 crore this year. Company officials said that the debt repayment commitment was on course.
The performance of the company during 2022-2 was hit hard by the record increase in the cost of fuel and power. ICL could not make good this due to supply overhang. “This was compounded by one-off charges on account of impairment of certain investments and advances. This was to some extent compensated by the profit on sale of investments. All these factors led to dismal performance for the quarter and the year ended 31st March 2023,” he said.
Stating that ICL had been through `difficult times’, he pointed to the resource constraints which further compounded the predicament of the company.
With the part-sale of land, he was hopeful of ICL breaking even by next quarter and posting marginal profit this financial year even if “there is no price increase in cement”.
Fielding a range of questions, Mr. Srinivasan said rising input costs combined with the vintage nature of its plants had hurt the critical financial numbers. He was confident of bringing down the variable cost significantly this year through operational efficiency. The sliding coal cost should help in a big way, he said. “We now have access to American coal, which is the best coal,” he added.
Increased cost of production erode margins
During the year under review, the cost per Kcal of fuel increased from around Rs.1.85 in the previous year to Rs.2.90 in the current year and the average rate of power went up from Rs.5.20 per KWH to Rs.7.04 per KWH, an increase of 35%. These two major factors together with reduction in blended cement proportion increased the cost of production by more than Rs.840 per tonne or 31% over that of previous year while net plant realisation improved hardly by Rs.200 per tonne, resulting in substantial erosion of the margins.
Negative factors impact EBITDA
All these factors had resulted in a negative EBITDA (earnings before interest, tax, depreciation and amortisation) of Rs.140 crore as compared to an EBITDA of Rs.478 crore in the previous year. Interest charges were at Rs.234 crore (Rs.204 crore) while depreciation was at Rs.213 crore (Rs.220 crores) and after netting of the exceptional income representing profit on sale of investments in Madhya Pradesh and one-off charges for impairment of investments and advances, the loss before tax for the year stood at Rs.407 crore against a profit of Rs.54 crore in the previous year.
After tax and other adjustments, the total comprehensive loss for the year was at Rs.188 crore as compared to a total comprehensive income of Rs.231 crore in the previous year. For the year under review, the company’s overall volume of sales was up by 9% in line with the industry. While clinker production was up by 8%, at 72.98 lakh tonnes. With the capacity utilisation of only 63% for the year, the margins were squeezed with uncompensated cost increase.
India Cements takes steps to improve liquidity
The company took steps to improve the liquidity through sale of investments in Madhya Pradesh which helped in the short-term to improve the capacity utilisation to around 72% in the 4th quarter as against 60% in the previous 9 months,” a company release said.
