Dalmia BharatLtd

Dalmia Bharat Limited reported its highest ever quarterly EBITDA of INR 883 crores in Q1 FY26, marking a 32% YoY improvement. EBITDA per ton increased by 40% YoY to INR 1,261, with the EBITDA margin expanding by 5.8 percentage points to 24.3%. This strong performance was attributed to improved price positioning and realization, which saw a 9% QoQ NSR improvement. Despite a 6% YoY de-growth in sales volumes to 7 million tons, the company emphasized a strategic shift towards balancing volume growth with profit margins, focusing on profitable growth and strengthening brand equity.

The company is on an aggressive expansion path, aiming to reach 63.5-64 MTPA total cement capacity by FY28. Key projects include a 3.6 MTPA clinker unit and 3 MTPA grinding unit in Belgaum, along with a new 3 MTPA greenfield grinding unit in Pune. Additionally, a 3.6 MTPA clinker unit and 6 MTPA grinding unit are approved for Kadapa, supported by a 3 MTPA bulk terminal in Chennai, with an estimated capex of INR 3,287 crores. A new 3.6 MTPA clinker line at Umrangso is nearing completion, with trial runs expected in September 2025 and commercial production in Q3 FY26.

Management noted a healthy improvement in prices across key operating regions, particularly in the South, which saw a good recovery from last year's lows. Prices in the East held steady, and despite the early onset of monsoon, spot prices remained firm, almost at Q1 average levels. The company expressed optimism that these prices would hold, attributing the improved realization to building brand equity, deepening distribution, and better price positioning. The long-term view is that industry consolidation will boost pricing power and make margins respectable.

Dalmia Bharat is committed to reducing costs by INR 150-200 per ton over the next two years. While these savings were not yet visible in Q1 FY26, initiatives in renewable energy are expected to show results by H2 FY26, and logistics optimization from Q4 FY26. The company commissioned 26 MW of new renewable energy capacity, increasing RE consumption to 41% from 35% last year. Raw material costs increased 8.5% YoY to INR 791 per ton due to a new mineral tax in Tamil Nadu, but power and fuel costs declined 2% YoY to INR 981 per ton due to lower fuel rates.

The company incurred INR 612 crores in capex during Q1 FY26, with a full-year FY26 plan of INR 4,000 crores, and a similar amount projected for FY27. These expansions are funded through a mix of internal accruals and debt. Gross debt stood at INR 6,456 crores and net debt at INR 873 crores, resulting in a net debt to EBITDA ratio of 0.33x. Management is confident of staying below a 2x net debt to EBITDA threshold, even with announced projects potentially increasing net debt to INR 5,000 crores. The company also issued INR 950 crores in NCDs during the quarter.

Dalmia Bharat is facing two key legal matters. The West Bengal government's Revocation Act, enacted on April 2, 2025, retrospectively discontinues incentive schemes, potentially affecting INR 250 crores of outstanding incentives. The company is challenging this legally, believing it has a strong case. Additionally, a news report regarding the reopening of an income tax assessment for FY2010-11 was addressed, with management stating they have filed a special leave petition and obtained an interim stay, considering the department's case unsustainable.