How has been the historical performance of Deccan Cements?

Revenue and Operating Performance

For the fiscal year ending March 2025, Deccan Cements reported total operating income of ₹526.98 crores, entirely derived from net sales as other operating income was nil. The company’s cost structure reveals significant expenditure on power, which accounted for ₹214.32 crores, nearly 40.7% of total operating income, underscoring the energy-intensive nature of cement manufacturing. Raw material costs stood at ₹69.55 crores, while manufacturing expenses and other costs combined to ₹178.67 crores, reflecting the operational overheads involved.

Employee costs were relatively modest at ₹30.68 crores, and there were no selling and distribution expenses reported, which may suggest direct sales or integrated distribution channels. The total expenditure excluding depreciation was ₹491.60 crores, resulting in an operating profit before other income of ₹35.38 crores. Including other income of ₹16.20 crores, the operating profit (PBDIT) rose to ₹51.58 crores, translating to an operating profit margin of 6.71% excluding other income and a gross profit margin of 7.37%.

Profitability and Earnings

Interest expenses amounted to ₹12.75 crores, which, after accounting for depreciation of ₹28.08 crores, brought the profit before tax to ₹10.74 crores. The company’s tax outgo was ₹3.22 crores, resulting in a consolidated net profit of ₹7.52 crores. This translated to a modest profit after tax margin of 1.43%, indicating tight profitability despite reasonable revenue levels.

Earnings per share stood at ₹5.37 on a face value of ₹5.00, reflecting the company’s ability to generate shareholder returns, albeit at a restrained level. The absence of extraordinary items or prior period adjustments suggests a clean earnings profile for the year.

Balance Sheet and Financial Position

Deccan Cements’ balance sheet as of March 2025 shows shareholder funds of ₹722.43 crores, supported by reserves of ₹715.42 crores and equity capital of ₹7.00 crores. The company carries a significant debt load, with total borrowings of ₹714.02 crores, split between long-term secured loans of ₹535.76 crores and short-term borrowings of ₹167.33 crores. This leverage level warrants monitoring given the modest profitability margins.

On the asset side, the company’s net block of fixed assets was ₹402.25 crores, supplemented by capital work in progress of ₹805.38 crores, signalling ongoing investments in capacity or infrastructure. Total assets stood at ₹1,625.39 crores, balanced by total liabilities of the same amount. The book value per share was robust at ₹515.74, indicating substantial net asset backing per share.

Cash Flow and Liquidity

Cash flow analysis reveals operational challenges, with cash flow from operating activities registering a negative ₹37 crores. This was influenced by a ₹71 crore increase in working capital requirements, which strained liquidity. Investing activities saw a significant outflow of ₹227 crores, likely related to capital expenditure and expansion efforts. Financing activities provided a positive inflow of ₹177 crores, partially offsetting the cash burn.

Overall, the company experienced a net cash outflow of ₹87 crores during the year, reducing cash and cash equivalents from ₹230 crores at the start to ₹142 crores at year-end. This contraction in liquidity highlights the importance of effective cash management amid expansion and operational pressures.

Summary and Outlook

Deccan Cements’ historical performance reflects a company in transition, balancing steady revenue generation with significant capital investments and operational costs. The relatively low profit margins and negative operating cash flow suggest that the company is navigating challenges typical of capital-intensive industries. However, the substantial capital work in progress and strong asset base indicate potential for future growth once these investments mature.

Investors should weigh the company’s current leverage and cash flow constraints against its asset backing and earnings potential. The absence of public shareholding and promoter pledging further adds to the ownership stability. Overall, Deccan Cements presents a cautious but potentially rewarding profile for stakeholders monitoring the cement sector’s evolving dynamics.

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