Detailed Narrative
Strong Q2 FY26 Performance Driven by Volume Growth
Sagar Cements reported a robust Q2 FY26, with revenue increasing 27% year-on-year to ₹602 crore, up from ₹475 crore in Q2 FY25. This growth was primarily fueled by a 17% year-on-year increase in sales volumes, despite the typical subdued demand during the monsoon season. EBITDA for the quarter saw a significant jump to ₹51 crore, compared to ₹20 crore in the prior year period, resulting in an improvement in EBITDA margins from 4% to 9%.
Profitability Impacted by Seasonal Factors and Adjustments
Despite the strong top-line growth, the company recorded a loss after tax of ₹44 crore in Q2 FY26. EBITDA per tonne stood at ₹377, a decline from the normalized Q1 figure of approximately ₹600 per tonne. This was attributed to a large incentive received in Q1, a 3-4% drop in realization due to seasonal trends, and inventory adjustments necessitated by plant shutdowns at Andhra and Mattampally for maintenance and upgrades. Power and fuel costs per tonne slightly decreased to ₹1,428 from ₹1,446 in Q2 FY25, while freight costs increased to ₹855 from ₹830 per tonne.
Capacity Expansion and Operational Efficiency Initiatives
Sagar Cements is actively pursuing its capacity expansion and efficiency enhancement plans. The new 6-stage preheater at the Dachepalli plant was successfully commissioned on October 23, 2025. Capacity expansion projects at Andhra Cement and Jeerabad are progressing as planned, with the Jeerabad capacity expected to increase from 1 million tonnes to 1.5 million tonnes by the end of FY26. The company also highlighted the 4.35-megawatt waste heat recovery project at Gudipadu unit, which is part of its cost optimization efforts.
Positive Market Outlook and Demand Projections
Management anticipates a strengthening of demand conditions in the second half of FY26, driven by pent-up consumption and increased government spending. For FY27, the company projects robust demand growth, with Andhra Pradesh and Telangana expected to grow over 15%, Tamil Nadu 5-10%, and Karnataka 3-5%. The pricing environment is expected to remain flat in Q3 before a potential pickup in Q4, with the company maintaining its full-year FY26 EBITDA per tonne guidance of ₹600.
Capital Structure and Land Sale Update
As of September 30, 2025, Sagar Cements reported gross debt of ₹1,610 crore, with long-term debt accounting for ₹1,216 crore, and a debt-to-equity ratio of 0.69:1. Cash and bank balances stood at ₹175 crore. The company's FY26 capex plan has been revised upwards from ₹360 crore to approximately ₹450 crore, with an additional ₹250-275 crore planned for FY27, including maintenance capex. The previously announced land sale has been delayed due to typographical errors but is still expected to conclude within the current financial year, potentially yielding a better realization.
Incentives and Employee Cost Management
The company received ₹11 crore in incentives during Q2, bringing the total for FY26 to ₹45 crore. For the next financial year, a minimum of ₹25-26 crore in incentives is expected, supplemented by an additional ₹3-5 crore from power incentives. Following a 10% annual increment, employee costs are projected to stabilize at a quarterly run rate of approximately ₹36.5 crore from Q3 onwards. Management emphasized ongoing cost optimization initiatives, including freight efficiency, clinker factor reduction, and increasing the share of renewable energy in its power mix.