India Ratings affirms credit rating on Birla Corporation, citing robust leverage and capacity utilization | Company Business News

India Ratings and Research (Ind-Ra) has reaffirmed the rating of Birla Corporation Limited’s (BCL) bank loan facilities at ‘IND AA/Stable’ and withdrawn the rating assigned to its non-convertible debentures (NCDs), the company informed the exchanges on Monday. This decision comes as BCL continues to strengthen its market position in the cement industry, supported by strategic expansions and operational efficiencies.

The affirmation of BCL’s bank loan facilities, amounting to ₹2,500 million, reflects the company’s robust financial profile and strategic initiatives aimed at enhancing its operational capabilities. Ind-Ra also assigned a rating of ‘IND AA/Stable’ to additional bank loan facilities worth ₹1,281.5 million. The withdrawal of the NCDs rating follows their full redemption on 28 February 2025.

Strong Market Position

BCL’s strong business profile is underpinned by its significant market presence across multiple regions in India. The company ranks among the top ten cement manufacturers in the country, with a total installed capacity of 20 million tonnes per annum (mtpa), the ratings agency noted. It holds a prominent position in Central India, commanding a capacity share of approximately 10%, and is also a key player in the West, East, and North markets. The company’s strategic focus on geographical diversification and operational efficiencies has enabled it to maintain a high-capacity utilization rate of around 90% in FY25, significantly above the industry average of 65%–70%, Ind-Ra added.

The company’s expansion plans are a critical component of its growth strategy. BCL is in the process of increasing its cement capacity by 7.6 million tonnes over the FY26-FY29 period. This expansion is expected to support medium-term growth and improve operational efficiencies. The company is also developing captive coal blocks and limestone mines to reduce its reliance on external sourcing, thereby enhancing cost efficiency. Ind-Ra anticipates that these initiatives could reduce the company’s susceptibility to volatility in coal and pet coke prices.

Improving Cost Efficiencies

Despite the industry’s challenges, BCL’s financial metrics have remained stable, the ratings agency said. The company’s net debt reduced to ₹22.4 billion at the end of FY25, down from ₹30 billion in the previous fiscal year. This reduction was facilitated by prudent capex management and improved free cash flows, despite a lower EBITDA. BCL’s net leverage (net debt/EBITDA) decreased to 1.8x in FY25, compared to 2.1x in FY24. The company’s gross interest coverage ratio also remained stable at 3.7x.

BCL’s liquidity position is deemed adequate, supported by healthy cash flows, free cash and cash equivalents, and unused working capital lines. The company’s cash and cash equivalents increased to ₹11.3 billion at the end of FY25, exceeding its scheduled repayment obligations for FY26. Additionally, BCL had investments in listed equities and bonds worth ₹7.6 billion at the end of FY25, providing further financial flexibility.

The company’s strategic focus on operational efficiencies is evident in its initiatives to increase the share of green power in its energy mix and develop captive coal mines. BCL’s green power share rose to 25% in FY25 and is projected to reach 35% by FY28. These measures are expected to reduce power and fuel costs, thereby improving overall profitability. The company aims to achieve an EBITDA per tonne of over ₹1,000 in the next two to three years, aligning with industry leaders’ profitability levels.

However, BCL remains exposed to fluctuations in key input costs, particularly pet coke, coal, and diesel. Any sharp increase in these costs, without a corresponding rise in cement prices, could pressure the company’s EBITDA and profitability margins. The company’s profitability is also sensitive to its ability to sustain operational efficiencies amid the cyclical nature of cement demand and supply.

Disclaimer: This article was generated using AI tools and has undergone editorial review for clarity and coherence.