Detailed Narrative
Q3 FY26 Performance and Market Dynamics
Sagar Cements reported an 8% year-on-year volume growth in Q3 FY26, contributing to a 5% increase in revenue, which reached ₹591 crore. Despite this growth, the company recorded a loss after tax of ₹64 crore, with EBITDA remaining flat at ₹38 crore, translating to an EBITDA per tonne of ₹254. Management noted that demand, initially subdued due to extended monsoons, picked up towards the latter half of the quarter, and expects to end FY26 with overall volumes of around 6 million tonnes.
Cost Optimization and Efficiency Initiatives
The company is actively implementing various cost reduction initiatives. Power and fuel costs per tonne decreased to ₹1,408 in Q3 FY26 from ₹1,456 in Q3 FY25, while freight costs also marginally reduced to ₹830 per tonne. Key projects include the successful commissioning of a 6-stage preheater at Dachepalli and the expected commissioning of a 4.35-megawatt Waste Heat Recovery project at Gudipadu by end of FY26, which is projected to save ₹100-125 per tonne.
Capacity Expansion and Project Timelines
Sagar Cements is progressing with its capacity expansion plans. The expansion of Jeerabad capacity from 1 million to 1.5 million tonnes is expected to be commissioned by early Q1 FY27. Additionally, cement capacity addition at Dachepalli is slated for August 2026. A new grinding mill at Jeerabad is also anticipated to contribute to operating leverage, potentially saving ₹150-200 per tonne, while an Andhra grinding plant is expected to yield ₹25-50 per tonne in savings.
Andhra Cements Turnaround and Profitability Outlook
The Andhra Cements unit has shown significant operational improvements following the commissioning of its new preheater. The unit's specific consumption for clinker is now below Mattampally at sub 720 Kcal/kg, with electrical units at 51 units. Management expressed confidence that Andhra Cements, which was very close to breakeven in Q3, is expected to achieve breakeven or become profitable in Q4 FY26, positively impacting the company's overall financial performance.
Debt Management and Asset Monetization Strategy
As of December 31, 2025, the company's gross debt stood at ₹1,627 crore, with a debt-equity ratio of 0.78:1. Sagar Cements plans to monetize its Vizag land, anticipating a net realization of approximately ₹350 crore over the next 18 months. These proceeds are primarily earmarked for debt reduction, with the strategic goal of bringing the debt-equity ratio closer to 0.5 within 18-24 months, enhancing financial stability.
Volume and Profitability Guidance
For FY26, the company has revised its volume outlook to 6 million tonnes, representing approximately 9% year-on-year growth, and projects 7 million tonnes for FY27. Management is targeting an EBITDA per tonne of ₹550 for Q4 FY26 and ₹500-525 for the full FY26, including incentives. Recent price increases in the non-trade segment (₹15-20) and modest increases in the trade segment (₹5-10) are expected to support this profitability outlook.
Capital Expenditure and Future Capacity Plans
The total capital expenditure for FY26 is projected to be ₹489 crore, with ₹303 crore spent in the first nine months and ₹186 crore budgeted for Q4. For FY27, the budgeted CapEx is ₹291 crore. The company does not foresee any major large CapEx plans for the next 2.5 to 3 years, beyond maintenance and ongoing projects. Significant capacity expansion CapEx, aimed at increasing capacity from 12 million to 15 million tonnes, is expected to commence only by end of FY28 or early FY29.