Shree Digvijay Cement Co. Ltd:Annual Report 2023-24 Analysis

Shree Digvijay Cement Company Ltd: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History #

Shree Digvijay Cement Company Ltd. (SDCCL) was incorporated in 1949. It was established by the Tata Group. The company has a rich history intertwined with the industrial development of India.

Headquarters Location #

The company’s headquarters are located in Mumbai, Maharashtra, India.

Company Vision and Mission #

• Vision: (Data unavailable, needs further research).
• Mission: (Data unavailable, needs further research).

Key Milestones in their Growth Journey #

• 1949: Incorporation of Shree Digvijay Cement Company Ltd.
• 1975: Introduction of Pozzolana Portland Cement
• 2019: Acquired by True North Fund VI LLP.

Stock Exchange Listing Details and Market Capitalization #

SDCCL is listed on the Bombay Stock Exchange (BSE). (Stock code and current market capitalization will need to be sourced from financial websites).

Recent Financial Performance Highlights #

(Requires access to the company’s latest annual reports or financial statements. Look for information on revenue, profit, EBITDA, debt levels, and key financial ratios.)

Management Team and Leadership Structure #

• Managing Director: Anil Kumar Pillai
• Chief Financial Officer: Sunil Kakrania

Notable Awards or Recognitions #

(Data unavailable, needs further research).

Products #

Complete Product Portfolio with Categories #

• Ordinary Portland Cement (OPC)
• Portland Pozzolana Cement (PPC)
• Sulphate Resistant Cement (SRC)
• Special Cement (Low alkali Cement)

Flagship or Signature Product Lines #

Portland Pozzolana Cement (PPC)

Manufacturing Facilities and Production Capacity #

SDCCL operates a manufacturing plant located in Sikka, Gujarat. The plant has a clinker capacity of 1.10 MTPA and cement capacity of 1.25 MTPA.

Quality Certifications and Standards #

SDCCL has consistently upheld quality standards. Look for specific certifications such as:

• BIS Certification: Mandatory for cement sold in India.

Primary Customers #

Target Industries and Sectors #

• Infrastructure development
• Residential construction
• Industrial projects

Geographic Markets (Domestic vs. International) #

Primarily focused on the Indian domestic market, particularly in the western and northern regions of India.

Major Client Segments (Agricultural, Industrial, Residential, etc.) #

• Residential construction companies
• Infrastructure developers
• Government agencies (for public works projects)

Distribution Network and Sales Channels #

Distribution network include a network of dealers and retailers.

Major Competitors #

Direct Competitors in India #

• Ultratech Cement
• Ambuja Cements
• ACC Cement
• Shree Cement
• Dalmia Bharat Cement

How they differentiate from competitors #

(Requires comparative analysis of product quality, pricing, brand reputation, and geographical presence. Look for any specific focus on niche markets or value-added services.)

Industry challenges and opportunities #

Challenges:

• Fluctuations in raw material prices (coal, limestone)
• Increasing energy costs
• Environmental regulations and compliance
• Intense competition
• Demand variations due to economic cycles

Opportunities:

• Government infrastructure spending (roads, railways, housing)
• Growth in urbanization and housing demand
• Increasing focus on sustainable construction practices
• Potential for export to neighboring countries

Future Outlook #

Expansion plans or growth strategy #

(Data unavailable, needs further research).

Sustainability initiatives or ESG commitments #

(Data unavailable, needs further research).

Industry trends affecting their business #

• Increased focus on green and sustainable cement production
• Adoption of digital technologies for process optimization and supply chain management
• Growing demand for specialized cement for specific construction applications.

Shree Digvijay Cement Company Limited: Performance Analysis (FY2024) #

Financial Performance Trend Analysis (FY22-FY24) #

Shree Digvijay Cement Company Limited (SDCCL) demonstrated a strong positive trajectory in key financial metrics over the past three fiscal years (FY22-FY24).

Revenue Growth #

Total Revenue (Net of GST) increased consistently, reaching ₹80,097.34 Lakhs in FY24, up 9.43% from ₹73,191.82 Lakhs in FY23 and 26.5% from ₹63,326.71 Lakhs in FY22. This reflects successful volume expansion and market penetration.

Profitability Surge #

Profitability metrics showed significant improvement, particularly in FY24.

• EBITDA: Grew 44.0% YoY to ₹15,494.21 Lakhs in FY24 from ₹10,759.78 Lakhs in FY23. FY22 EBITDA was ₹8,840.32 Lakhs. The EBITDA margin expanded notably to 19.34% in FY24 from 14.70% in FY23, driven by increased sales, stable operations, and potentially moderated input costs.
• PBT: Increased sharply by 66.5% YoY to ₹11,820.67 Lakhs in FY24 from ₹7,100.15 Lakhs in FY23. FY22 PBT stood at ₹8,808.77 Lakhs.
• PAT: Recorded a 52.0% YoY growth to ₹8,775.71 Lakhs in FY24 from ₹5,771.30 Lakhs in FY23. FY22 PAT was ₹5,719.50 Lakhs. The Net Profit Margin improved to 10.96% in FY24 from 7.88% in FY23.

Return Ratios #

Capital efficiency improved significantly.

• ROCE: Increased substantially to 32.5% in FY24 from 21.1% in FY23.
• ROE: Improved to 24.9% in FY24 from 18.1% in FY23.

Dividend #

Consistent dividend payout reflects improved financial health and shareholder return focus, with a recommended dividend of ₹3.00/share for FY24 following ₹4.00/share (total) in FY23 and ₹3.50/share (total) in FY22.

Balance Sheet #

The company remains debt-free with a strong liquidity position, evidenced by healthy cash and bank balances. Net Worth grew by 17% YoY to ₹38,120.66 Lakhs in FY24.

Business Segment Performance #

SDCCL operates primarily in a single reportable business segment: Manufacturing and Sales of Cement.

Operational Metrics (YoY Growth FY24 vs FY23) #

• Cement Production: Increased by 5.8% to 13.48 Lakhs MT.
• Clinker Production: Increased by 6.2% to 10.34 Lakhs MT.
• Cement Sales Volume: Achieved record sales, increasing by 8.1% to 13.61 Lakhs MT (excluding self-consumption).

Performance Drivers #

Growth was attributed to increased sales volume, stable plant operations resulting from asset optimisation, higher contribution from blended and special products, and effective cost management. The focus on supply chain efficiency is noted as a key factor in achieving high EBITDA and return ratios.

Major Strategic Initiatives and Progress #

Capacity Expansion #

A key strategic initiative is the expansion of cement grinding capacity at the Sikka plant, aiming to increase total capacity to 3.00 MTPA. Environmental Clearance was received in 2023, the project is currently under construction, and completion is targeted for Q4 FY25.

Disciplined Capital Allocation #

Management emphasizes a focus on Free Cash Flow (FCF) generation and efficient capital allocation. The expansion strategy includes evaluating “build versus buy” options to minimize balance sheet burden.

Green Energy Investment #

Acquired a 27% equity stake in CGE Shree Digvijay Cement Green Energy Private Limited (Associate Company) in May 2023 for a contracted capacity of 8.10 MW hybrid wind and solar power.

Operational Efficiency & Cost Control #

Continued focus on optimizing plant performance, improving energy efficiency , enhancing logistics, and controlling overheads contributed significantly to the improved profitability.

Risk Landscape Changes #

The risk landscape remains influenced by industry dynamics and operational factors:

Market & Competition #

Intense competition due to ongoing capacity additions across the industry, potentially impacting market share and pricing power, particularly in fragmented markets. The company mitigates this partly through brand building and expansion.

Input Cost Volatility #

Significant exposure to fluctuations in power and fuel costs. Mitigation includes green energy investments and increasing AFR usage. Limestone scarcity is a long-term raw material risk, addressed partially by promoting blended cements.

Regulatory & Compliance #

The dynamic regulatory environment poses ongoing compliance risks.

Climate Change #

Physical risks and transition risks are inherent to the sector. Mitigation involves water conservation, emission reduction projects, and green energy adoption.

Operational Risks #

Plant stability, supply chain disruptions, and cyber security threats are actively managed through internal controls, risk management policies, and IT security measures.

Financial Reporting Risk #

Auditors identified Revenue Recognition as a Key Audit Matter, focusing on the risk of misstatement around the timing or validity of revenue booking.

Detailed Analysis #

Shree Digvijay Cement Company Limited (SDCCL) - FY 2024 Financial Analysis #

Based on the 79th Annual Report (FY 2023-24) #

Comparative Financial Analysis (FY22-FY24) #

Note: FY22 figures derived from 10-Year Financial Highlights.

Balance Sheet Summary (Standalone) #

(₹ in Lakhs)

Profit & Loss Summary (Standalone) #

(₹ in Lakhs)

Shree Digvijay Cement Company Limited - Financial Analysis (FY 2023-24) #

Revenue Analysis #

• Segment Revenue:
  • Cement Business (Manufacturing & Sales): ₹79,032.65 lakhs (FY24) vs. ₹72,181.24 lakhs (FY23). YoY Growth: +9.49%. (Accounts for ~98.6% of total income).
  • Other (Logistics & Trading): Minimal contribution noted in segment reporting, specific revenue figure not isolated in provided P&L summary but subsidiary turnover noted as ₹47.25 lakhs in Form AOC-1.
• Geographic Revenue:
  • Domestic: ₹78,330.87 lakhs (FY24) vs. ₹72,181.24 lakhs (FY23). YoY Growth: +8.52%.
  • Overseas: ₹701.78 lakhs (FY24) vs. ₹0 lakhs (FY23). Export contribution in FY24: 0.89%.
• Overall Revenue Growth: Total income increased by 9.43% YoY from ₹73,191.82 lakhs (FY23) to ₹80,097.34 lakhs (FY24). Growth driven primarily by increased sales volume in the domestic cement market.

Cost Structure Analysis #

Margin Analysis #

• Gross Margin (Total Income - Material Cost): 80.24% (FY24) vs. 82.42% (FY23). Decrease primarily due to a higher share of material costs.
• EBITDA Margin (EBITDA / Total Income): 19.34% (FY24) vs. 14.70% (FY23). Significant improvement driven by lower power & fuel costs and potentially better operational efficiency despite lower gross margins. (EBITDA calculated as PBT + Depreciation + Finance Cost).
• Operating Profit (PBT) Margin (PBT / Total Income): 14.76% (FY24) vs. 9.70% (FY23). Improvement mirrors EBITDA trend, reflecting better cost control below the gross profit line.
• Net Profit Margin (PAT / Total Income): 10.96% (FY24) vs. 7.89% (FY23). Significant improvement driven by higher operating profitability and relatively stable tax rates.

Operating Leverage #

• Total Income Growth: 9.43% YoY.
• EBITDA Growth: 44.0% YoY (₹15,494.21 lakhs vs. ₹10,759.78 lakhs).
• PBT Growth: 66.48% YoY (₹11,820.67 lakhs vs. ₹7,100.15 lakhs).
• The significantly higher growth rates in EBITDA and PBT compared to revenue growth indicate positive operating leverage during FY24. Improved cost management, particularly in power and fuel, contributed to this.

Non-Recurring / Exceptional Items #

• The consolidated P&L for FY24 does not list any “Exceptional Items”.
• Other Income (Note 27): Includes ‘Profit on sale of property, plant and equipment (net)’ [₹1.62 lakhs] and ‘Provision/Liability written back’ [₹32.65 lakhs], which could be considered non-operational or non-recurring.
• Other Expenses (Note 33): Includes ‘Loss on sale / write-off of property, plant and equipment (net)’ [₹26.98 lakhs].

EPS Analysis #

• Growth in EPS is driven by the significant increase in Profit After Tax (PAT).
• The difference between Basic and Diluted EPS is due to the potential dilution from outstanding Employee Stock Options (ESOPs).

Cash Management Analysis of Shree Digvijay Cement Company Limited (FY 2023-24) #

Cash Flow Analysis #

Operating Cash Flow (OCF) #

Net cash generated from operating activities stood at ₹9,006.94 lakhs in FY24, compared to ₹8,262.84 lakhs in FY23, indicating improved operational cash generation year-over-year.

Investing Cash Flow (ICF) #

Net cash used in investing activities was ₹6,104.63 lakhs in FY24, a significant increase from ₹3,801.68 lakhs used in FY23. This primarily reflects payments for property, plant, equipment (PPE), and intangible assets (€5,737.79 lakhs), largely driven by the ongoing capacity expansion project, and investment in associate CGE Shree Digvijay Cement Green Energy Private Limited (€799.00 lakhs).

Financing Cash Flow (FCF) #

Net cash used in financing activities decreased to ₹3,093.89 lakhs in FY24 from ₹4,975.93 lakhs in FY23. Key components include dividend payments (€3,946.79 lakhs) and proceeds from the issue of share capital on ESOP exercise (€881.68 lakhs). Lease liability repayments also contribute to this outflow.

Working Capital Management Efficiency #

• Current Ratio: 2.0 times in FY24 (2.1 times in FY23).
• Inventory Turnover Ratio: 6.7 times in FY24 (6.3 times in FY23).
• Debtors Turnover Ratio: 24.1 times in FY24 (34.0 times in FY23).
• Days Sales Outstanding (DSO): 15 days in FY24 (11 days in FY23).

Capital Expenditure (Capex) Analysis #

• Total payments for PPE and intangible assets were ₹5,737.79 lakhs in FY24 (₹2,819.71 lakhs in FY23).
• This capex relates primarily to the Cement business segment.
• A major component is the ongoing expansion project at the Sikka unit, aiming to increase total cement capacity to 3.00 MTPA. This new grinding unit is expected to be completed in Q4 FY25.
• The Capital Work-in-Progress stood at ₹3,884.93 lakhs as of March 31, 2024.

Shree Digvijay Cement Company Limited: FY23-24 Financial Analysis #

Revenue and Profitability #

• Revenue Growth: Total standalone income increased by 9.43% YoY, reaching ₹80,097.34 lakhs in FY24 from ₹73,191.82 lakhs in FY23. This was driven by increased sales volume, stable plant operations, and record sales of blended/special products.
• Profitability Surge:
  • Standalone EBITDA grew significantly by 44.00% YoY to ₹15,494.21 lakhs from ₹10,759.78 lakhs.
  • Standalone PBT rose 66.48% YoY to ₹11,820.67 lakhs from ₹7,100.15 lakhs.
  • Standalone PAT increased by 52.06% YoY to ₹8,775.71 lakhs from ₹5,771.30 lakhs.
• Margin Expansion:
  • Standalone EBITDA margin improved to 19.34% in FY24 from 14.70% in FY23.
  • Standalone PAT margin increased to 10.96% in FY24 from 7.88% in FY23.
• Performance Attribution: Profitability enhancement was attributed to higher sales volumes, better plant performance via asset optimization, effective cost control (particularly lower coal prices compared to the previous year), and an improved product mix favouring higher-margin blended and special cements.

Market Position #

• Profitability Benchmark: Management believes the company is potentially the most profitable cement entity in India relative to its plant vintage, marking a significant turnaround.
• Competitive Landscape: The Management Discussion & Analysis (MDA) notes intense competition stemming from capacity additions in the industry, posing a risk to market share and pricing power.
• Growth Recognition: The company was recognized as the second Fastest Growing Cement Company in the Small Category at the 7th Cement Review Awards 2023.

Product Performance #

• Product Mix: Increased focus on and sales of blended (PPC) and special cement products contributed positively to revenue and earnings expansion. The blended cement portfolio constituted 55% of total cement production in FY24.
• Production Volumes (YoY Growth):
  • Cement: 13.48 Lakh MT (+5.81%)
  • Clinker: 10.34 Lakh MT (+6.16%)
• Sales Volumes (YoY Growth):
  • Cement (Domestic, incl. self-consumption): 13.61 Lakh MT (+8.10%)
  • Clinker: Negligible sales.

Geographic Distribution #

• Primary Market: Operations are concentrated domestically, primarily serving the market from its plant in Gujarat.
• Exports: Export contribution to total turnover was minimal at 0.89% in FY24.
• Market Reach: Planned capacity expansion aims to strengthen the company’s base and facilitate entry into wider markets.

Capital Allocation and Expansion #

• Capacity Expansion: A significant grinding unit expansion project is underway at the Sikka facility, aiming to increase total cement capacity to 3.00 MTPA. The project is expected to be completed in Q4 FY25. Management emphasizes achieving this expansion with low capital cost.
• Strategic Investments: Acquired a 27% equity stake in CGE Shree Digvijay Cement Green Energy Private Limited for ₹7.99 Crores to secure 8.10 MW of captive hybrid (wind and solar) power.
• Capital Allocation Philosophy: Management prioritizes capital allocation guided by Free Cash Flow (FCF) generation, evaluating build versus buy decisions to avoid over-leveraging and maintain balance sheet health.
• Return Ratios (Management Figures - FY24 vs FY19):
  • ROCE: Reported at 33% (FY24) vs 2% (FY19).
  • ROE: Reported at 25% (FY24) vs 1% (FY19). (Note: Calculation methodology for Management figures may differ from standard calculations based solely on reported financials).
• Financial Position: The company remained debt-free as of March 31, 2024, with adequate cash reserves. Credit ratings remained stable (CRISIL A/Stable - Long Term, CRISIL A1 - Short Term).

Operational Efficiency #

• Energy Efficiency:
  • Overall Specific Power Consumption decreased by 1.73% to 78.83 kWh/t cement.
  • Specific Power Consumption (Kiln section) reduced to 33.69 kWh/t clinker.
  • Specific Power Consumption (PPC grinding) reduced to 26.58 kWh/t cement.
  • Green Energy Contribution (WHRS + Wind/Solar) increased to 35.83% of total power requirement.
  • Thermal Substitution Rate (TSR) using alternative fuels significantly increased to 4.92% from 1.6% in FY23.
• Environmental Performance:
  • Specific Net CO2 emissions reduced by 0.88% to 674 kgCO2/t cement.
  • Specific Dust Emissions reduced by 2.33% to 42 gm/t cement.
  • Specific Water Consumption reduced by 2.17% to 0.135 kl/t cement.
• Asset & Inventory Management:
  • Fixed Assets Turnover Ratio improved to 4.0 times from 3.7 times.
  • Inventory Turnover Ratio improved to 5.4 times from 5.1 times.
• Human Capital: Management highlighted high employee productivity, citing EBITDA per person at approximately ₹62 lakhs.

Growth and Challenges #

• Growth Strategy: Focused on expanding capacity (to 3 MTPA), enhancing market reach, improving product mix towards value-added cements, optimizing costs through operational efficiency and green energy, and leveraging digitalization.
• Key Challenges & Risks:
  • Market Risk: Intense competition impacting pricing and market share.
  • Cost Risk: Volatility in power, fuel (coal), and freight costs; potential increases in raw material costs.
  • Operational Risk: Ensuring stable plant operations and managing limestone availability/quality.
  • Compliance & ESG: Adherence to evolving environmental regulations and climate change impacts.
  • Other Risks: Talent retention, cyber security threats.
• Mitigation: Strategies include cost control initiatives, increasing alternative fuel usage, securing captive renewable power, maintaining a strong balance sheet, and a robust risk management framework reviewed by the Board and relevant committees.

Shree Digvijay Cement Company Limited (SDCCL) - Risk Analysis (FY 2023-24) #

I. Strategic Risks #

1. Market Competition & Capacity Expansion Execution #

• Severity: High
• Likelihood: High
• Trend: Increasing (Industry-wide capacity additions noted in MD&A)
• Mitigation: Ongoing capacity expansion project (to 3.0 MTPA) to enhance market position; focus on blended/special products; brand building; cost optimization to maintain competitiveness. Project progress monitored, expected completion Q4 FY25.
• Control Effectiveness: Medium (Project execution risk remains until completion; market share impact ongoing).
• Potential Financial Impact: Pressure on market share, sales volume, and pricing power; risk of project cost/time overruns impacting future profitability and ROCE. Successful expansion could drive significant revenue growth.

2. Capital Allocation & Growth Strategy #

• Severity: Medium
• Likelihood: Medium (Dependent on future M&A opportunities vs. build decisions)
• Trend: Stable (Stated philosophy of FCF-driven growth, build vs. buy evaluation).
• Mitigation: Explicit focus on Free Cash Flow (FCF) generation and ROCE/ROE optimization; evaluating build vs. buy options for expansion to avoid over-leveraging; efficient supply chain management.
• Control Effectiveness: High (Demonstrated profitability and FCF generation in recent years; debt-free status maintained).
• Potential Financial Impact: Suboptimal capital allocation could lead to lower returns (ROE/ROCE) or balance sheet stress. Efficient allocation can sustain high profitability and shareholder value. FY24 ROCE improved significantly to 33% from 2% in FY19.

3. Talent Management & Succession Planning #

• Severity: Medium
• Likelihood: Medium
• Trend: Stable/Increasing (Competitive industry; recent MD change highlights importance).
• Mitigation: Stated mechanism for succession planning for Directors, KMP, and Senior Management overseen by NRC & Board; performance appraisal system; training & development programs; focus on employee engagement and retention.
• Control Effectiveness: Medium (Effectiveness judged over the long term; key management changes handled smoothly in FY24).
• Potential Financial Impact: Loss of key personnel could impact strategic execution and operational performance; failure to develop internal talent pipeline increases external hiring risks/costs.

II. Operational Risks #

1. Raw Material Availability & Cost #

• Severity: High
• Likelihood: Medium
• Trend: Increasing (Limestone scarcity near plant; reliance on fly ash/slag subject to availability/price from other industries).
• Mitigation: Focus on increasing blended cement production (55% in FY24); multi-pit mining for optimal resource utilization; alternative raw material (AFR) usage; efficient supply chain management. Secured mining rights for Jodhpur Block.
• Control Effectiveness: Medium (Material cost increased in FY24 vs FY23, indicating pressure; dependent on external factors for fly ash/slag).
• Potential Financial Impact: Increased production costs impacting margins (Material cost was ~19% of Revenue from Ops); potential production constraints if key materials become scarce/expensive.

2. Power & Fuel Cost and Availability #

• Severity: High
• Likelihood: High (Significant cost component; volatile international coal prices; grid dependency).
• Trend: Volatile (Coal prices fluctuated, though eased somewhat allowing margin improvement in FY24 vs FY23).
• Mitigation: WHRS (260.3 Lakh units generated); Wind/Hybrid PPA (134 Lakh units consumed); increasing Alternative Fuel & Raw Material (AFR) usage (TSR increased to 4.92% from 1.6%, target 7%); energy efficiency measures (specific power consumption reduced to 78.83 kWh/ton from 80.22 kWh/ton). Total Green energy contribution 35.83%. New hybrid PPA aims for >65% renewable mix with WHRS.
• Control Effectiveness: Medium-High (Significant mitigation via renewables and AFR, but still reliant on coal for ~85% kiln fire needs). Power & Fuel cost decreased as % of Revenue from Ops in FY24 vs FY23 due to lower coal prices and efficiency measures.
• Potential Financial Impact: Significant impact on EBITDA margins (Power & Fuel cost was ~31% of Revenue from Ops in FY24). Price volatility directly affects profitability. Investments in green energy/AFR have upfront costs but long-term benefits.

3. Freight & Logistics Costs #

• Severity: Medium
• Likelihood: High (Majority dispatches via road; diesel price fluctuations).
• Trend: Increasing (Diesel price volatility; general inflationary pressure).
• Mitigation: Logistics optimisation efforts (managed by subsidiary SDCCL Logistics Ltd.); focus on efficient supply chain management; potential for rail/sea transport (limited use currently).
• Control Effectiveness: Medium (Freight cost increased in FY24 vs FY23).
• Potential Financial Impact: Increased operating expenses impacting margins (Freight was ~15% of Revenue from Ops in FY24).

4. Plant Operations & Efficiency #

• Severity: Medium
• Likelihood: Low
• Trend: Improving (Record production/sales in FY24 attributed to stable operations and asset optimization).
• Mitigation: Continuous improvement focus; asset optimization initiatives; ISO certifications (14001, 45001); experienced technical team; investments in debottlenecking (e.g., cement transportation circuit).
• Control Effectiveness: High (Demonstrated by record FY24 production and sales figures).
• Potential Financial Impact: Plant breakdowns or inefficiencies could lead to lost production, increased costs, and failure to meet sales targets.

5. Climate Change (Physical & Transition Risks) #

• Severity: Medium-High (Long-term)
• Likelihood: Medium (Physical risks); High (Transition risks - regulatory/market changes).
• Trend: Increasing
• Mitigation: Water conservation efforts (consumption reduced); increasing green energy use; co-processing waste (circular economy); emission control measures (SOx, NOx, Dust within limits); biodiversity management (tree plantation, CAPB); sustainable mining practices; focus on blended cement.
• Control Effectiveness: Medium-High (Proactive measures in place and reported progress, but long-term systemic risks remain).
• Potential Financial Impact: Increased compliance costs (e.g., carbon pricing), operational disruptions from extreme weather, reputational impact, changing market demand for low-carbon products.

III. Financial Risks #

1. Credit Risk #

• Severity: Low-Medium
• Likelihood: Medium
• Trend: Stable
• Mitigation: Credit approvals, limits, periodic monitoring; security deposits/bank guarantees from some customers; Expected Credit Loss (ECL) provisioning based on simplified approach (provision matrix).
• Control Effectiveness: High (Low ECL provision reported; DSO improved slightly implicitly suggesting good collections though Debtors Turnover Ratio worsened).
• Potential Financial Impact: Bad debts impacting profitability. Gross Trade Receivables at INR 3,219.06 Lakhs (Net: INR 3,211.01 Lakhs) as of March 31, 2024.

2. Liquidity Risk #

• Severity: Low
• Likelihood: Low
• Trend: Stable
• Mitigation: Maintaining adequate cash reserves; debt-free status; monitoring cash flow forecasts; undrawn borrowing facilities (INR 12,073 Lakhs available fund/non-fund based). Strong working capital management.
• Control Effectiveness: High (Company is debt-free with positive cash flow from operations). Cash & equivalents INR 1,293 Lakhs, plus other bank balances (TDs) of INR 10,033 Lakhs. Current Ratio at 2.06.
• Potential Financial Impact: Inability to meet short-term obligations or fund operational/capex needs.

3. Contingent Liabilities Risk #

• Severity: Medium
• Likelihood: Low-Medium
• Trend: Stable
• Mitigation: Contesting demands legally; provisions made where appropriate (though none specified for major contingent items); disclosures made in financial statements.
• Control Effectiveness: Medium (Outcome of disputes uncertain).
• Potential Financial Impact: Potential cash outflow if disputes are lost. Major items include MPT demand (INR 309.84 Lakhs), Electricity Duty demand (INR 1,472 Lakhs - INR 500 Lakhs deposited), and other tax/duty disputes totaling approx. INR 588 Lakhs (amount under dispute).

4. Revenue Recognition Risk #

• Severity: Medium
• Likelihood: Low (Identified as KAM by auditors implies inherent risk exists).
• Trend: Stable
• Mitigation: Defined revenue recognition policy compliant with Ind AS; internal controls over recording revenue; auditor testing.
• Control Effectiveness: Medium-High (Auditors issued unmodified opinion but identified as KAM).
• Potential Financial Impact: Misstatement of revenue and profit.

IV. Compliance / Regulatory Risks #

1. Environmental Compliance #

• Severity: High
• Likelihood: Low-Medium
• Trend: Increasing (Stricter norms expected).
• Mitigation: ISO 14001 certification

Shree Digvijay Cement Company Limited (SDCCL) - Financial Analysis Report #

Executive Summary #

Shree Digvijay Cement Company Limited (SDCCL) reported record financial performance for FY 2023-24, achieving its highest-ever EBITDA, PBT, and PAT. This marks a significant turnaround from its loss-making history, attributed to enhanced operational efficiencies, cost control, and increased sales volumes, particularly in blended and special products. Key strategic initiatives include a capacity expansion project targeting 3.00 MTPA by Q4 FY25, guided by a capital allocation philosophy focused on Free Cash Flow (FCF) generation and evaluating build vs. buy options to minimize balance sheet burden. The company maintains a debt-free status and strong liquidity. Key risks revolve around input costs (fuel, power, raw materials), market competition, regulatory compliance, and execution of the expansion project.

Financial Performance Analysis #

• Revenue & Profitability: Total income reached a record ₹80,097.34 lakhs, a 9.43% increase YoY. PBT surged 66% to ₹11,820.67 lakhs, and PAT grew 52% to ₹8,775.71 lakhs. EBITDA stood at ₹15,494.21 lakhs, up 44% YoY, with an EBITDA margin of 19.34% (vs. 15% in FY23). This performance reflects successful cost management (especially power & fuel) and improved sales realization.
• Historical Trend: The Chairman highlighted a dramatic transformation over 5 years (FY19 vs FY24), moving from losses to significant profitability, with ROCE improving from 2% to 33% and ROE from 1% to 25%. Dividend payments have been consistent in recent years after a long gap.
• Key Ratios:
  • Return on Equity (ROE): 24.9% (vs. 18.10% in FY23)
  • Return on Capital Employed (ROCE): 32.5% (vs. 21.1% in FY23)
  • Net Profit Margin: 10.96% (vs. 8% in FY23)
  • Current Ratio: 2.04 (vs. 2.11 in FY23)
  • Fixed Assets Turnover Ratio: 4.11 (vs. 3.83 in FY23)
• Liquidity & Capital Structure: The company remains debt-free. Cash and cash equivalents stood at ₹1,293.11 lakhs, with additional bank balances (including Fixed Deposits >3 months) of ₹10,033.29 lakhs. Credit ratings were reaffirmed at CRISIL A/Stable (Long-term) and CRISIL A1 (Short-term).
• Share Capital: Paid-up capital increased to ₹1,474.07 lakhs due to the allotment of 22.04 lakh equity shares upon ESOP exercise.

Operational Performance #

• Production & Sales: Achieved record cement production (13.48 Lakh MT vs 12.74 LMT YoY) and clinker production (10.34 LMT vs 9.74 LMT YoY). Record cement sales reached 13.61 LMT (vs 12.59 LMT YoY). Growth driven by stable plant operations and asset optimisation.
• Efficiency:
  • Specific power consumption reduced to 78.83 kWh/ton cement (vs 80.22 kWh/ton YoY).
  • Green energy (WHRS + Wind/Solar Hybrid) contributed 35.83% of total power needs. WHRS generation was 260.3 Lakh units (Net). Hybrid power PPA contributed 134 Lakh units.
  • Thermal Substitution Rate (TSR) increased significantly to 4.92% (from 1.6% YoY) through enhanced waste co-processing (24,013 MT AFR used).
  • Focus on blended cement production continued (55% of total production), aiding clinker factor reduction and CO2 emission control (specific net CO2 reduced from 680 to 674 kg/t cement).
  • Specific NOx emissions reduced by 11%; SOx emissions remained well below limits.

Strategic Initiatives & Outlook #

• Capacity Expansion: The primary strategic focus is expanding cement capacity to 3.00 MTPA via a new grinding unit at the Sikka plant. The project is underway and expected to commission in Q4 FY25.
• Capital Allocation: Management emphasizes FCF generation and prudent capital allocation. The expansion aims for low capital cost, potentially through evaluating ‘buy’ opportunities if cheaper than ‘build’, challenging conventional self-reliance models in the industry.
• Market Outlook: The company anticipates robust demand driven by government infrastructure focus (NIP, Gati Shakti, Housing for All), increased private capex, and India’s low per capita cement consumption. The Indian economy is projected to maintain strong growth (RBI: 7% for FY25).
• Digitalization & ESG: Continued focus on digitalization across operations and integration of ESG plans (targeting water neutrality, emission reduction, circular economy) are strategic priorities.

Risk Analysis & Mitigation #

• Key Risks:
  • Input Costs: Volatility in power, fuel (coal), and freight costs remains a major concern. Dependency on imported coal exposes the company to international price fluctuations.
  • Market & Competition: Intense competition due to ongoing capacity additions in the industry.
  • Raw Materials: Scarcity and price volatility of limestone and supplementary materials (fly ash, slag).
  • Regulatory & Compliance: Evolving environmental norms, mining regulations, and legal requirements.
  • Climate Change: Physical and transition risks associated with climate change.
  • Execution Risk: Timely and cost-effective completion of the capacity expansion project.
  • Other Risks: Talent retention, cyber security, financial risks (forex, interest rates - though currently minimal impact due to debt-free status).
• Mitigation Strategies: Focus on cost control, increasing green energy usage (WHRS, Hybrid power PPA), enhancing AFR co-processing, improving logistics, robust compliance systems, talent development programs, cyber security measures, and proactive risk management framework reviewed by the Board/Committees.

Corporate Governance & Key Audit Matters #

• Governance: The company reports compliance with Corporate Governance norms and Secretarial Standards. Board composition includes 50% Independent Directors. Various committees (Audit, NRC, RMC, SRC, CSR) are in place.
• Auditor’s Report: Auditors issued an unmodified opinion on both standalone and consolidated financial statements.
• Key Audit Matter: Revenue Recognition was highlighted as a Key Audit Matter, focusing on the risks associated with the timing of recognition (control transfer based on delivery terms) and potential overstatement or recording of fictitious revenue. Audit procedures included testing controls, sampling transactions, verifying delivery documents, and assessing revenue recognition policies.

Management Guidance & Assumptions #

• Explicit Guidance: Capacity expansion to 3.00 MTPA targeted for commissioning in Q4 FY25. Dividend of ₹3.00/share recommended for FY24.
• Assumptions (Implied): Continued strong domestic demand fueled by government infrastructure spending and housing initiatives. Ability to manage volatile input costs through operational efficiencies and alternative sourcing (green power, AFR). Successful and cost-effective execution of the expansion project. Stable regulatory environment.
• Sensitivity: Performance is highly sensitive to coal and pet coke prices, power tariffs, freight costs, and overall cement demand/pricing dynamics in its key markets (Gujarat). Expansion project timelines and costs are critical execution sensitivities.
• Scenario Analysis:
  • Positive Scenario: Sustained high infrastructure spending, favorable input costs, timely commissioning of new capacity leading to market share gains and enhanced profitability.
  • Negative Scenario: Sharp increase in fuel/power costs, slowdown in government spending/demand, delays or cost overruns in expansion project, adverse regulatory changes impacting profitability and returns.

Audit & Compliance #

Audit and Regulatory Analysis #

Financial Analysis Report: Shree Digvijay Cement Company Limited (SDCCL) #

Based on Information Provided up to June 29, 2024 (primarily FY 2023-24 Annual Report)

Auditor’s Opinion and Qualifications #

Opinion #

The Statutory Auditors, B S R and Co, issued an unmodified opinion on both the Standalone and Consolidated Financial Statements for the year ended March 31, 2024, stating that the financial statements give a true and fair view in conformity with Indian Accounting Standards (Ind AS) and the requirements of the Companies Act, 2013.

Qualifications #

The auditors’ reports on both Standalone and Consolidated financials contain a modification regarding compliance with Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014. Specifically, the auditors noted deficiencies in the audit trail (edit log) feature of the accounting software:

• It was not enabled at the database level for certain fields/tables.
• It was not enabled at the application layer for privileged user access for a portion of the financial year (April 1, 2023, to February 7, 2024).

This constitutes a non-compliance with specific record-keeping requirements under the Companies Act rules, although it did not lead to a qualification on the overall truth and fairness of the financial statements themselves.