Cement & Cement Products

August 31, 2012 Panyam Cement & Minerals Industries Ltd.

CMP Rs. 52.0 Company Overview
BSE Code 500322
Panyam Cement and Mineral Industries Ltd. (PCMIL), incorporated in 1955,
BSE ID PANCM has interests across cement, chemical and engineering sectors. The
High/Low 1Y (Rs.) 81.5 / 33.9 company's cement plant at Kurnool, Andhra Pradesh, has an installed
Average Volume (3M) 421 capacity of 531,000 MT per annum. Other capacities include 10,000 MT per
Market Cap (Rs. Cr.) 83 annum for steel wire, 14,850 MT per annum for calcium carbide and 1,800
MT per annum for acetylene black. PCMIL manufactures portland cement
Shareholding % Jun-12 Mar-12 under the brand name, Pyramid. Its steel wire division came into existence
Promoters 51.50 51.41 when Deccan Wires was amalgamated with the company. The company's
# major clients include Union Carbide, Geep Industrial Syndicate, Lakhanpal
DIIs 0.37 0.37
# National, IOC, Chemplast, etc. It installed additional generating sets to
FIIs 18.03 18.03
overcome the power cuts imposed by the Andhra Pradesh Electricity Board.
Public & Others 31.10 30.19 Its cement division is in the process of fabricating a grate cooler in-house in
order to change the existing planetary cooler, which will enhance the Kiln’s
Stock Chart ( Relative to Sensex) capacity.
Company Fundamentals
200
Fall in cement prices hurt domestic business
150 The net sales in FY12 stood at Rs.172.5 crore against Rs.125.8 crore in the
previous year. The company posted a net profit of Rs. 9.1 crore in FY12
100
against a net loss of Rs. 3.8 crore in the previous year. The first two
50 quarters of FY11 witnessed lower volume of sales and steep fall in cement
29-Aug-11 29-Feb-12 29-Aug-12
prices due to recession, which resulted in overall net loss for the company
Panyam Sensex in FY11. The company was able to make a turnaround at the operational
level in FY12.
Operational Performance (for FY11)
Stock Performance (%) 1M 6M 1Yr
The operational performance of the cement unit remained satisfactory
Panyam 5.4 -29.1 7.8
during FY11. The company produced 4,01,072 MT of cement in 2010-11
Sensex 1.7 -1.8 6.2 against 4,33,034 MT in the previous year, registering a capacity
utilization of 75.5% in FY11 against 81.6% in the previous year. In spite of
Financials FY10 FY11 FY12 witnessing fall in production of cement due to economic downturn in FY11,
Revenue 139.9 125.8 176.2 PCMIL was able to improve its sales realization by 9.5% Y-o-Y at Rs 3,772.9
Y-o-Y -24.3% -10.1% 40.1% per MT.
EBITDA 36.0 4.6 33.9
Y-o-Y -36.6% -87.1% 632.0%
Modernisation of cement unit
During FY11, the company undertook trial runs for modernization of its Kiln
Net Profit 14.5 -3.8 9.1
No.1 for increasing its capacity from 550 MT per day to 1800 MT per day.
Y-o-Y -57.9% PL LP
But due to technical problems, the kiln could not be stabilized. The
EPS (Dil.) 9.1 -2.4 5.7 production from Kiln No.1 was scheduled to commence during the second
EBITDA Margin 25.8% 3.7% 19.2% quarter of FY12. The cost of the project is estimated at Rs. 56.19 crore.
Net Profit Margin 10.4% - 5.2%
P/E(x) 5.7x - 9.1x Key Strengths
Financial year ends at March 31. All figures in Rs. crore except
for per share data - Capacity expansion of Kiln No.1 will boost the topline
#
FIIs- Foreign Institutional Investors
# - Strategically located near high-quality limestone mines
DIIs- Domestic Institutional Investors
PL - Profit to Loss
LP - Loss to Profit

Initiative of the BSE Investors’ Protection Fund -1-

 Panyam Cements & Mineral Industries Ltd.

Company Business
Panyam Cements & Mineral Industries Limited is one of the established cement manufacturers in South India
and has its presence in different states including Andhra Pradesh, Tamil Nadu, Karnataka and in some parts of
Kerala. Panyam was promoted by late Padmasri Machani Somappa and others and was incorporated on June 23,
1955 with the objective of establishing and starting a basic heavy industrial unit in the economically backward
region of Rayalaseema. The company had acquired 232.3 acres of land and the lime stone mines are located at a
distance of about 2 – 3 km from the factory site.

Initially one kiln, with a capacity of 200 TPD, was installed and later on the capacities were augmented by
addition of two more kilns with a capacity of 300 TPD and 600 TPD, respectively. Over the years, the wet process
kilns were converted into dry process and the capacities were increased to a level of 2200 TPD by 1997, running
three kilns. The company diversified its activities in 1980 by amalgamating Deccan Wires Limited (a unit of the
then promoters’ group), which was incorporated in 1976 in Bangalore for manufacturing 10000 tonnes of high
carbon and alloy steel wires. The said Engineering Division has about 20.80 acres of prime land at Bommanahalli,
Bangalore.

The company has taken up the modernization of Kiln No.1 by increasing the capacity of the said kiln to 1800 MT
per day. The production from Kiln No.1 was scheduled to commence during the second quarter of FY12. The
project was financed by Indian Overseas Bank and State Bank of Hyderabad.

Operational Performance
Particulars FY09 FY10 FY11
Cement Produced (MT) 503,252 433,034 401,072
Growth % -14.0% -7.4%
Cement sold (MT) 501,774 431,804 402,818
Growth % -13.9% -6.7%
Cement sold (Rs crore) 205.5 148.9 152.0
Sales realization 4,096 3,447 3,773
Growth % -15.8% 9.45%
Installed Capacity (MT) 531,000 531,000 531,000
Realisations per bag 204.8 172.4 188.6
Growth % -15.8% 9.4%
Capacity Utilisation 94.8% 81.6% 75.5%

Source: Company Annual Report

Initiative of the BSE Investors’ Protection Fund -2-

Industry Overview
The installed capacity of cement in India stands at 318 million MT per annum, out of which 65 million MT is
accounted for in the state of Andhra Pradesh. The capacities which are being added in India in the next financial
year, i.e., FY13, stands at 30 million MT and in Andhra Pradesh, the expected capacity addition for FY13 stands
at 6 million MT.

Historically, five states (Uttar Pradesh, Tamil Nadu, Andhra Pradesh, Maharashtra and Gujarat) which account
for about 50% of India’s population, have been the core cement consumers, accounting for approximately 48%
of the total cement consumption and implying a strong per-capita consumption. Uttar Pradesh, which comprises
about 17% of India’s population, is one of the lowest per-capita cement consumers in India and can provide a
significant upside for cement growth over the long term.

Cement consumption at state level (top states) Per capita cement consumption
Tamil Andhra 300
Nadu, 9% Pradesh, 10% 250
200
150
100
50
Uttar Gujarat, 7%
Pradesh, 10% 0
Andhra Gujarat Maharashtra Uttar Tamil Nadu
Pradesh Pradesh

Maharashtra, Per Capita Cement Consumption

12%
Source: Census 2011, CMA

Cement industry in India has seen a jump in the total installed capacity whereas the effective demand for the
product during the year has not kept pace with the increase in production capacities. As the industry has
become highly competitive, in view of the surplus production, particularly in the state of Andhra Pradesh, an
effective cost management and better logistics arrangement will be the key to achieve a sustainable growth in
the long term. With the emphasis being put by the Government on the infrastructure projects, roads, housing
and rural projects, apart from irrigation projects, the demand for cement in 2012-13 is expected to receive a
boost and it should help the companies achieve better performance.

Competitor Analysis
We have compared Panyam with its close peers in the cement industry.

EBIT
Revenue EPS
Company Year End CMP* M Cap Margin P/E
(FY12) (FY12)
(FY12)
Panyam Cement Mar-12 52 92 176 14.4% 5.7 9.1x
Anjani Portland Cement Mar-12 26 48 329 15.3% 9.3 2.8x
Kakatiya Cement Mar-12 86 66 169 15.1% 26.4 3.3x
Source: Company Financials, BSE, Market cap and Revenue in Rs. Crore, *CMP as on 31 Aug 2012

Initiative of the BSE Investors’ Protection Fund -3-

 Panyam Cement & Mineral Industries Ltd.

Summary Financials

Particulars (Rs crore) FY10 FY11 FY12

Net Sales 130.8 125.8 172.5
Other Op. Revenue 9.0 0.0 3.7
Total Revenue 139.9 125.8 176.2
Growth (%) -24.3% -10.1% 40.1%
Cost of Goods Sold -65.7 -76.5 -91.8
Gross Profit 74.2 49.3 84.4
Employee Costs -6.6 -7.4 -8.7
Other Expenditure -31.6 -37.2 -41.8
EBITDA 36.0 4.6 33.9
Growth (%) -36.6% -87.1% 632.0%
Depreciation -3.4 -5.1 -8.4
EBIT Profit 32.6 -0.4 25.5
Finance cost -12.1 -7.9 -13.8
Other Income 0.0 4.5 5.1
Exceptional Items 0.0 0.0 0.0
PBT 20.5 -3.8 16.8
Growth (%) -47.1% PL LP
Income Tax -6.0 0.0 -7.6
Profit after Tax 14.5 -3.8 9.1
Extra Ordinary Items 0.0 0.0 0.0
Net Profit 14.5 -3.8 9.1
Growth (%) -57.9% PL LP
Rep. Basic EPS 9.1 -2.4 5.7
Rep. Diluted EPS 9.1 -2.4 5.7
Equity Capital 16.2 16.2 16.2
Face value 10 10 10

Ratio Analysis FY10 FY11 FY12

Margins
EBITDA Margin (%) 25.8% 3.7% 19.2%
Net Profit Margin (%) 10.4% - 5.2%
Valuation
P/E (x) 5.7 9.1
P/BV (x) 1.7 11.3 5.1
Profitability
ROCE (%) 66.1% -0.5% 37.3%
RONW (%) 29.4% -51.0% 55.0%
Solvency Ratio
Debt/ Equity Ratio (x) 2.17 13.66 4.94
Interest Cover (x) 2.7 - 1.8
Bifurcation between Long Term and Short Term Debt is not available for FY10

Initiative of the BSE Investors’ Protection Fund -4-

 Contact Details:
ICRA Online Limited
research@[Link]

Disclaimer
All information contained in this document has been obtained by ICRA Online Limited from sources believed by it to be accurate and reliable. Although reasonable
care has been taken to ensure that the information herein is true, such information is provided 'as is' without any warranty of any kind, and ICRA Online Limited in
particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. All information
contained herein must be construed solely as statements of opinion, and ICRA Online Limited shall not be liable for any losses incurred by users from any use of
this document or its contents in any manner. Opinions expressed in this document are not the opinions of our holding company and of the subsidiary companies
and should not be construed as any indication of credit rating or grading of ICRA for any instruments that have been issued or are to be issued by any entity.

Published on behalf of BSE Investors' Protection Fund

BSE Investor’s Protection Fund

First Floor, P J Towers, Dalal Street, Mumbai. Tel: 22721233/34 [Link]

Initiative of the BSE Investors’ Protection Fund -5-