The Ramco Cements Ltd has successfully executed its plan to divest non-core assets, a strategic move aimed at strengthening its balance sheet. The company has now monetized assets worth over ₹1,000 crore, using the proceeds to reduce its debt burden. This financial cleanup provides a more stable foundation, but analysts say the stock's next phase of growth will be dictated by a sustained recovery in cement prices and better plant utilisation across its key markets.
Asset Monetization Exceeds Target
On December 22, 2025, the company announced a significant transaction, selling assets valued at ₹515 crore to real estate developer Prestige Estates Projects Ltd. This deal pushed the total proceeds from non-core asset sales to ₹1,017 crore, slightly surpassing the company's own guidance of ₹1,000 crore. Prior to this, Ramco Cements had already generated ₹502 crore from similar divestments.
Management has been unequivocal about the use of these funds: all proceeds are being directed towards debt reduction. This strategy yields immediate benefits, including lower interest costs, improved cash flow resilience, and reduced financial risk during industry downturns when cement pricing is weak.
Financial Health and Capacity Expansion
As of September 30, 2025, Ramco Cements carried a net debt of ₹4,591 crore. Its debt-to-equity ratio stood at 0.6x, with an interest coverage ratio of 3.23x. While these metrics are considered manageable, they remain a point of attention for a company actively engaged in a capital-intensive expansion phase.
Despite recent challenges, the company's long-term growth plan remains on course. Ramco is on track to increase its cement capacity to 30 million tonnes per annum (MTPA) by the end of FY26, up from the current 24.4 MTPA. A crucial positive is that the major portion of the capital expenditure for this expansion is already complete. This means that future volume increases should translate more efficiently into profits, providing better margin flow-through.
Margins Show Signs of Recovery
After a difficult period, the company's profitability metrics are beginning to improve. The EBITDA margin hit a low of 13% in the fourth quarter of FY25 (Q4FY25) but rebounded to 19% in Q1FY26. It moderated slightly to 17% in the second quarter (Q2FY26).
More importantly, EBITDA per tonne rose to ₹866 in Q2FY26, compared to ₹721 in the same period last year. This improvement was driven by several factors:
- Better realizations and operational efficiencies.
- A significant reduction in power and fuel costs, with power costs down by ₹92 per tonne year-on-year.
- Increased use of green power, which accounted for 48% of total power consumption in Q2FY26, up from 39% a year ago.
The company is also pulling other structural levers. The share of premium products in its portfolio has increased to 30% from 27% last year. Additionally, its construction chemicals business, which generated ₹165 crore in revenue in the first half of FY26 (H1FY26), is being nurtured as a key growth driver for the future.
The Road Ahead: Pricing is Key
Despite the balance sheet improvement and capacity expansion, growth has been muted recently. For H1FY26, revenue increased by just 4% year-on-year, reflecting soft demand and uneven pricing, partly attributed to early monsoon conditions. Capacity utilisation during this period was 69%, indicating ample room for improvement as demand recovers.
Ramco's stock has gained nearly 10% over the past year. While the debt reduction and margin recovery are positive developments, much of this optimism may already be priced into the current valuation. Analysts believe that for the stock to see sustained upward movement, a meaningful and lasting recovery in cement prices and utilisation levels is essential.
Brokerage firm ICICI Securities highlighted this concern in a report dated December 30, 2025. They pointed out that recent price erosion in Ramco's key markets of south and east India could constrain EBITDA estimates if prices fail to recover. The report also noted persistent concerns about high leverage and a muted return-on-equity profile, suggesting limited room for valuation multiple expansion in the near term.
In conclusion, The Ramco Cements has adeptly navigated the balance sheet strengthening phase. The company now stands at an inflection point where its future performance will be less about financial engineering and more about core operational excellence—capitalizing on its expanded capacity in a favorable pricing environment.
