Ramco Cements Ltd is striving to impress investors through the monetization of non-core assets, debt reduction, and its recently launched construction chemicals business.
Amid this, weak December quarter (Q3FY26) results didn’t help, even as cement volumes grew year-on-year for the first time after three straight quarters, up about 4% to 4.43 million tonnes (mt). Still, this reading was below the industry’s high-single-digit growth, pointing to continued market share loss. Ramco’s problem is its vast exposure to South India, where overcapacity and stiff competition are keeping cement prices muted.
Q3 cement prices in the trade segment in southern and eastern markets fell by 8-9% from September-end, the management said. Due to a steeper drop in key regions than pan-India prices, Ramco’s cement realizations fell at a more-than-expected rate of about 7%. Thus, EBITDA at ₹281 crore missed the consensus estimate of ₹345 crores. EBITDA is short for earnings before interest, depreciation, and amortization.
Weak metrics
Weak profitability is feared to hamper other metrics, too. According to HDFC Securities, Ebitda/tonne of ₹610 in Q3FY26 was at a 13-quarter low, and Ramco’s subdued profitability should keep its leverage high (net-debt-to-Ebitda will remain >2x during FY26-27E) and return ratios low. “Amid lower profitability, we have deferred its Karnataka expansion to FY29E,” said HDFC.
As of December-end, Ramco’s net debt fell to ₹4,145 crore from ₹4,481 crore in March-end. In the past two years, it has monetized non-core assets of ₹1,020 crore versus guidance of ₹1,000 crore and is considering monetization of another ₹200 crores.
Ramco is expanding capacity via de-bottlenecking and selective brownfield additions. But a major disappointment in Q3FY26 came from a 12-month delay in commissioning of the Kolimigundala, Andhra Pradesh line-2, which is now expected by March 2027. It aims to raise cement capacity from around 24mt now to 31mt by March 2027. Also, FY26 capital expenditure guidance was cut slightly to ₹1,100 crore from ₹1,200 crores.
Subdued expectations
Various brokerages downgraded Ramco’s FY27-FY28 earnings estimates, and a quick respite is unlikely. “Although construction chemicals and quartz could be optionality triggers for Ramco from a longer-term perspective, near-term earnings would be governed by dynamics in the South (around 80% volume mix),” said DAM Capital.
This region’s low utilization of nearly 66% and effective supply addition of around 25mtpa over FY26-27 would cap pricing/profitability improvement in the medium-term, it added.
Ramco’s shares are up about 30% over the past year, trading at FY27 estimated EV/Ebitda of 16.5x, shown Bloomberg data. This is unappealing given the headwinds in the cement business.
