India Ratings & Research Agency has assigned a credit rating of "IND BBB/Rating watch with developing implications/IND A3+/ Rating watch with developing implications" to Andhra Cements Limited (ACL) for its availed Loans and Working Capital Limits, effective April 8, 2026. This rating action follows the in-principle approval by the boards of Sagar Cements Limited (SCL) and ACL for the proposed amalgamation of ACL with its parent SCL. The amalgamation is expected to be completed within the next nine to twelve months, subject to regulatory and statutory approvals. Upon completion, ACL will cease to exist as a separate legal entity, and its debt instruments will be transferred to SCL. ACL reported a modest EBITDA of ₹72.3 million in 9MFY26. India Ratings believes ACL may require continued financial support from SCL until the amalgamation is finalized. The proposed amalgamation is expected to simplify the group's cement business structure, reduce overhead costs, and rationalize compliance requirements. ACL's accumulated losses are also anticipated to reduce tax outflows at the consolidated level. The share exchange ratio will be determined post a valuation exercise. ACL's strategic importance to SCL is highlighted by its growth potential and its role in enhancing the group's cost structure and market share. ACL's cement capacity is 2.25 million tonnes, representing approximately 21% of SCL's consolidated capacity as of end-March 2025, a share expected to increase to around 27% by end-FY27. SCL had also extended inter-corporate deposits and advances aggregating ₹950 million to ACL as of end-March 2025. SCL's consolidated cement capacity is projected to increase to 11.75 million tonnes by FY27. The company's consolidated sales volumes grew 12% year-on-year to 4.3 million tonnes in FY25. Profitability improved due to industry-wide price hikes, though prices moderated from September 2025. SCL's consolidated EBITDA per tonne recovered to ₹493 in 9MFY26, but elevated capex commitments are likely to keep leverage metrics high in the near term. SCL's net leverage was 6.2x as of 9MFY26.
