Andhra Cements Limited , a subsidiary of Sagar Cements Limited, has filed its initial disclosure for FY 2026-27 with the National Stock Exchange and BSE Limited. The disclosure confirms that the company does not qualify as a large corporate under SEBI's debt securities issuance regulations.

SEBI Compliance Disclosure

The company submitted the disclosure in reference to SEBI Circular No. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/172 dated October 19, 2023, which pertains to fund raising by issuance of debt securities by large entities. Andhra Cements confirmed that it does not fulfill all three conditions mentioned in Clause 3.2 of the circular to be considered a large corporate.

Financial Position and Borrowings

The company's qualified borrowings showed a significant increase during FY 2025-26. The detailed borrowing position reveals the company's debt management strategy and financial requirements.

Credit Rating and Market Position

Andhra Cements maintains a credit rating of IND BBB/Rating watch, which reflects its current financial standing in the market. The company did not raise any funds through debt securities issuance during FY 2025-26, relying instead on other forms of qualified borrowings to meet its financial requirements.

Corporate Structure and Operations

The disclosure was signed by G. Tirupati Rao, Company Secretary (Membership No. FCS-2818), and submitted from the company's registered office at Durga Cement Works, Durgapuram. The company operates multiple facilities including its Vizag Unit at Visakha Cement Works and maintains its corporate office in Hyderabad.

This regulatory filing demonstrates Andhra Cements' commitment to transparency and compliance with SEBI regulations, providing stakeholders with clear information about its borrowing position and regulatory status for the upcoming financial year.

Andhra cements has been placed on Rating Watch with Developing Implications by India Ratings and Research following the proposed merger with its parent company Sagar Cements Limited. The rating agency assigned IND BBB/Rating Watch with Developing Implications for long-term facilities and IND A3+/Rating Watch with Developing Implications for short-term facilities on the company's bank loan facilities worth INR9,869.70 million.

Rating Action Details

The Rating Watch placement follows the in-principal approval by the boards of directors of both Sagar Cements Limited and Andhra Cements for the proposed amalgamation. The scheme remains subject to requisite statutory, regulatory, and shareholder approvals, including approval from the jurisdictional National Company Law Tribunal.

Strategic Rationale for Merger

India Ratings continues to apply a top-down approach under its Parent Subsidiary Linkage Rating Criteria, given Andhra Cements' strong linkages with Sagar Cements Limited, which holds a 75% stake and is rated IND BBB+/Negative. The proposed amalgamation is expected to simplify and streamline the group's cement business structure, lower overhead costs while eliminating duplicate functions, and rationalize compliance requirements.

Upon completion of the amalgamation, Andhra Cements will cease to exist as a separate legal entity and its debt instruments will be transferred to Sagar Cements Limited. The company's accumulated losses would also reduce tax outflows at the consolidated level. Andhra Cements has a cement capacity of 2.25 million tonnes, accounting for around 21% of Sagar Cements' consolidated capacity as of end-March 2025.

Financial Performance and Support

Andhra Cements reported modest financial performance in the recent period, with the company showing signs of operational recovery. The rating agency believes Andhra Cements may continue to require financial support from Sagar Cements Limited to meet its committed obligations until the completion of the amalgamation.

In addition to its equity stake, Sagar Cements Limited had extended inter-corporate deposits and advances aggregating INR950 million to Andhra Cements as of end-March 2025, demonstrating the parent company's commitment to supporting the subsidiary.

Liquidity and Risk Factors

The rating agency has assessed the liquidity position as stretched, with average utilization of fund-based and non-fund-based working capital limits at around 90% and 85% respectively over the 12 months ended February 2026. However, Sagar Cements Limited maintains available liquidity of around INR0.8 billion as of 9MFY26, supported by fund infusions from promoters, along with sanctioned-but-undrawn bank lines of around INR2.5 billion.

India Ratings expects the industry to face challenges from higher input costs during 1QFY27 due to Gulf geopolitical situations, once existing fuel inventories are depleted. The industry's ability to implement price hikes amid elevated competitive intensity will be crucial for profitability in the coming months.

Company Background

Andhra Cements Limited was acquired by Sagar Cements Limited in March 2023 following approval from the National Company Law Tribunal in February 2023. The company was not operational during FY20-FY23 but commenced operations in 1QFY24. It operates cement grinding facilities with a capacity of 2.25 million tonnes at Durga Cement Works located in Guntur, Andhra Pradesh.