India Cements recovers advances to shore up working capital amid losses

India Cements is recovering advances given to group companies to shore up working capital amid consecutive quarters of losses as the Chennai-based company’s plans to raise funds through the sale of land parcels faced delays.  

The Chennai Super Kings owner, which has seen three straight quarters of losses, needs Rs 250 crore-Rs 300 crore of working capital. 

In a post-result interaction, Vice Chairperson & MD N Srinivasan said the firm has recovered Rs 115-crore advances from group companies this year, and that it hoped to recall more to ease its liquidity position and meet operational requirements. Over the years, India Cements has given loans and advances to associate companies and subsidiaries such as Coromandel Sugars and India Cements Infrastructures.  

India Cements is also trying to monetise non-core assets such as surplus land to raise funds for refurbishment of plants, improving efficiency and augmenting working capital needs. It also managed to sell a portion of its land parcel in Andhra Pradesh. “We have found the sale of lands takes time due to various reasons. Therefore, we looked at other options and started recovering advances given to group companies,” Srinivasan said. 

On Wednesday, it reported a lower net loss of Rs 81.39 crore in Q2FY24 as compared to a loss of Rs 137.58 crore in the same quarter last year. Total income came to Rs 1,228 crore as compared to Rs 1,258 crore in the year-ago quarter. Between April 2022 and September 2023, its total net loss stands at Rs 345 crore.  

The firm repaid Rs 140 crore loans during the quarter under review, reducing its outstanding debt to Rs 2,807 crore as on September 30, 2023, from Rs 2,947 crore three months ago.  

A note that came with the results said that despite the continuous reduction in variable cost, the drop in net plant realisation for cement continued resulting in lower margins and lower capacity utlisation. The performance of the company, hence, continued to be sub-optimal with a negative bottomline. 

It further said that production and sale of cement accordingly was only marginally higher by 5% compared to the earlier year. Overall volume for the quarter under review was 23.70 lakh tons compared to 22.54 lakh tons in the previous year. 

The firm is working with experts such as Boston Consulting Group and Thyssenkrupp Industries to improve efficiencies in their operations. “Going forward, the outlook for cement demand looks positive and prices are expected to remain firm. With further reduction in variable cost, improving liquidity, and capacity utilisation, we hope to be back in black,” the MD said.

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