| Shree Digvijay Cement Co. Limited | ||||||
| Rating outlook revised to 'Negative'; Rating Reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has revised its outlook on the long-term bank facilities of Shree Digvijay Cement Co. Ltd (SDCCL) to ‘Negative’ from ‘Stable’ and reaffirmed the rating at ‘Crisil A’; the short-term rating has been reaffirmed at ‘Crisil A1’
The outlook revision factors in the weaker-than-expected performance over the past few quarters on account of decrease in realization, leading to steep decline in operating margin and net cash accrual. Operating margin weakened to around 5.80% in 9M FY2025 from around 18.69% in fiscal 2024. Further annual shut down amount to Rs. 17 Cr in Q3-2025 has further impact overall profitability. Improvement in realization and increased EBITDA per tonne which has reduced in last few quarters will be key monitrable, also any prolonged cost pressures resulting in subdued operating margin may weaken credit profile.
Alos company is undertaking a capex programme of Rs 250.0 crore, funded through term debt of ~Rs 125.0 crore. Any significant increase in debt along with moderation in operating performance may adversely affect debt protection metrics. Hence, timely completion of the ongoing capex and ramp-up in production from new capacities will remain monitorable.
The rating continues to reflect SDCCL’s established market position in the cement industry, comfortable operating efficiencies, and healthy financial risk profile even though debt-funded capex is planned. These strengths are partially offset by large working capital requirement, exposure to intense competition and risks related to volatility in raw material prices, susceptibility to risks related to the commoditized nature of products and cyclicality in the cement industry. |
Analytical Approach For arriving at the ratings, Crisil Ratings has taken a consolidated approach for SDCCL and its wholly owned subsidiary, SDCCL Logistics Ltd.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
On the group level, revenue grew 9% on-year to Rs 790 crore in fiscal 2024 backed by marginal increase in volume and improved average sales realisation. The demand scenario remained weak in the first 9 months of fiscal 2025 and the average realisation and operating margin remain subdued. The group estimates revenue of Rs ~509 crore and operating margin of 5.80% during this time. Though timely improvement in realization in cement prices will help to improve performance in the coming quarters, any prolonged cost pressures resulting in subdued operating margin may weaken credit profile.
There is abundant availability of limestone in its captive mines along with waste heat recovery (WHR) system of 4.5 MW, which is adequate to meet 25-30% of its requirement. The company also has hybrid power contract for capacity of 8.10 MW hybrid wind and solar power with Continuum Energy. Hence, the WHR system along with hybrid power contracts would constitute over 65% of the power needs of the company.
SDCCL announced brownfield capex for setting up 3.0 million tonne cement grinding capacity (from existing capacity of 1.5 million tonne). The overall project cost is estimated at Rs 250 crore and is to be funded through debt of 50% and balance through internal accrual. The capacity is expected to be commissioned in the fourth quarter of fiscal 2025. Given the size of the project, the company is exposed to execution risks and its ability to ramp up expanded capacity. Hence, timely commencement of commercial operations, within budgeted cost, will remain a key monitorable. However, SDCCL’s past track record of successfully completing various capacity addition projects provides comfort.
Although 50% of the capex will be debt-funded, the capital structure is expected to remain comfortable due to healthy accrual and scheduled debt repayment.
Weaknesses:
Capacity additions in the commoditised cement industry tend to be sporadic because of long gestation periods associated with setting up of new facilities and numerous players adding capacities during the peak of a cycle. This led to unfavourable price cycles for the sector in the past. Cyclical downturns in the industry result in slow offtake, constraining the operating rate and the ability of players to pass on any rise in input costs. |
Liquidity: Strong Current ratio is healthy at 1.99 times on March 31, 2024. |
Outlook: Negative Operating performance may remain subdued owing to realization and any delay in the commencement of ongoing capex or price escalation can weaken the credit profile of the company. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated in November 1944, SDCCL manufactures cement at the coastal township of Digvijaygram (Sikka) in Jamnagar district of Gujarat. The company has an installed capacity of 1.5 MTPA. The company is listed on the NSE and BSE. |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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