There is consolidation in the Indian cement sector even after Adani Group’s large acquisition of cement assets of ACC, Ambuja and Sanghi Industries. Now, the Birla Group’s Ultratech Cement has acquired the cement company of Kesoram Industries. There have been 13 mergers and acquisitions during the last 7 years in the Indian cement industry and sector analysts feel that this trend may continue as larger corporates with stronger financial muscle are trying to boost their market share through inorganic growth driving healthy consolidation in the cement industry.
The dynamics of the cement sector have changed after the pandemic with consolidation, the new mantra in the cement industry, and visible across the sector when an aggressive player enters the market it exerts huge pressure on the smaller companies. Analysts tracking the cement sector expect a shakeout in the southern Indian markets over the next couple of years helping the pricing power of cement companies. Deccan Cements Ltd was incorporated in the year 1979 with its cement plant having commenced commercial production in 1982.
The factory is located at Bhavanipuram in Nalgonda District of Telangana which is around 165 km from Hyderabad. The plant manufactures a wide variety of cement including specialty cement for certain special applications conforming to BIS, British, and other international standards. Apart from the manufacturing of regular grade cement, the Specialty cement produced are Sulphate Resistant Cement, Low Heat Cement Low Alkali Cement, etc. Deccan Cements is one of the few manufacturers approved by the Research Designs and Standards Organisation (RDSO) of Indian Railways to manufacture and supply a special grade of superfine cement having enhanced quality and performance characteristics required in the production of Railway Sleepers.
The company has a strong network of more than 1000 cement dealers and consignment agents spread throughout the length and breadth of Southern India. High-quality limestone is the basic raw material used in the manufacture of cement with the company having its own captive limestone mine near the plant premises ensuring a continued and uninterrupted supply of high-grade limestone. The limestone mine is self-operated by the company and deploys modern high-productivity mining equipment that assures consistency in quality.
Deccan Cement also has coal linkages with Singareni Collieries Co. Ltd for a regular supply of coal which is the other major input in the manufacture of cement. The company has adopted proven process technologies from world leaders in the field such as FL Smidth from Denmark and Humboldt of Germany. There are also 2 independent facilities providing high flexibility in manufacturing customer-specific specialty cement products as per market requirements. Plus the plant also has fully equipped modern physical and chemical laboratories to carry out testing of incoming raw materials and outgoing finished goods. The cement plant is self-sufficient in power with a Captive Thermal Power Plant (15MW), Hydro-electric Power Plant (3.75MW), and Wind Mills (2.025MW) under its umbrella.
Deccan Cements posted decent Q3FY24 financial results with net sales at Rs. 216.86 crores for the quarter ended December 2023 up 2.72% from Rs 211.13 crores for the same quarter of December 2022. The Quarterly Net Profit stood at Rs 15.39 crore for the quarter ending December 2023 up 26.56% from Rs 12.16 crore for the same quarter of December 2022 while EBITDA climbed to Rs 32.86 crore up 22.98% from Rs 26.72 crore during the quarter of December 2022. Deccan Cements EPS increased to Rs 10.98 in the December 2023 quarter from Rs. 8.68 in the December 2022 quarter. Fund managers and analysts are bullish on the Deccan Cement stock currently quoting at Rs 550 on the bourses to appreciate by over 30% in the next one-year time frame on the back of good quarterly financial results. Investors can do their proper due diligence and take professional advice from their broker before purchasing the stock.