India Ratings affirms credit rating on Birla Corporation, citing robust leverage and capacity utilization

India Ratings and Research (Ind-Ra) has reaffirmed the rating on bank credit facilities of Birla Corporation Limited (BCL) as ‘IND AA/Stable’ and withdrawn the rating on non-convertible debentures (NCDs). This decision comes as BCL continues to bolster its market position in the cement sector through strategic expansions and operational efficiencies.

Approval of BCL’s bank loan facilities ₹2,500 million reflects the company’s strong financial profile and strategic initiatives to enhance its operational capabilities. Ind-Ra also gave ‘IND AA/Stable’ rating to additional bank loan facilities. ₹1,281.5 million. The withdrawal of the BOH rating follows its full withdrawal on February 28, 2025.

Strong Market Position

BCL’s strong business profile is supported by its significant market presence in various regions of India. The rating agency stated that the company is among the top ten cement producers in the country with a total installed capacity of 20 million tonnes per annum (mtpa). It has a significant position in Central India with a capacity share of around 10% and is also a major player in the Western, Eastern and Northern markets. Ind-Ra added that the company’s strategic focus on geographical diversification and operational efficiency has enabled it to maintain a high capacity utilization rate of around 90% in FY25, significantly above the industry average of 65%-70%.

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 during FY26-FY29. This expansion is expected to support medium-term growth and improve operational efficiency. The company is also developing coal blocks and limestone mines to reduce its dependence on external sources and thus increase cost efficiency. Ind-Ra anticipates that these initiatives could reduce the company’s vulnerability to fluctuations in coal and coke prices.

Increasing Cost Efficiency

The rating agency said BCL’s financial metrics remained stable despite challenges in the industry. The company’s net debt decreased ₹22.4 billion at the end of FY25 ₹30 billion in the previous fiscal year. This decline was facilitated by prudent capex management and improving free cash flows despite lower EBITDA. BCL’s net leverage (net debt/EBITDA) fell 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 limits. The company’s cash and cash equivalents increased ₹11.3 billion at the end of FY25, which exceeded the planned repayment obligations for FY26. Additionally, BCL had investments in publicly traded stocks and bonds. ₹7.6 billion at the end of FY25, providing greater financial flexibility.

The company’s strategic focus on operational efficiency is evident in its initiatives to increase the share of green energy in the energy mix and develop its coal mines. BCL’s green energy share increased to 25% in FY25 and is expected to reach 35% in FY28. These measures are expected to reduce power and fuel costs and therefore increase overall profitability. The company aims to achieve EBITDA per ton ₹1,000 in the next two to three years, in line with the profitability levels of industry leaders.

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

Disclaimer: This article was created using AI tools and has been editorially reviewed for clarity and consistency.