Sagar Cements Ltd — Capital/Financing Update 2018

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SAGAR CEMENTS LIMITED

SCL:SEC:NSE :BSE:2018-19

5th December 2018

The National Stock Exchange of India Ltd., "Exchange Plaza", 5[th ] Floor Bandra -Kurla Complex Bandra (East) Mumbai - 400 051

The Secretary BSE Limited P J Towers Dalal Street Mumbai - 400 001

Symbol: SAGCEM Serles: EQ

Scrip Code: 502090

Dear Sirs

Press Release

Further to our letter dated 5[th ] December, 2018, we are sending herewith a copy of the Press Release being issued by us following the board meeting held on today.

Thanking you

Yours faithfully For Sagar Cements Limited

Encl: a.a.

��m f ���J t .���� (�·�,:1 Registered Office : Plot No. 111, Road No. I 0,Jubilee Hills, Hyderabad - 500 033 Phone : +91-40-23351571, 23356572 Fax : +91-40-23356573 [email protected] www.sagarcements.in CIN : L26942TG 1981 PLC002887

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Sagar Cements Limited

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A c q u isition Up d ate

December 2018

Acquisition Update – December 2018

1

Contents

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Company Overview Goals / Ambition Proposed Acquisition Benefits Financial Implication

Acquisition Update – December 2018

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Sagar Cements Overview

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Promoted by experienced technocrat entrepreneurs; Listed entity with over 3 decades of successful operations

Plant started in 1985 with a capacity of 66,000 TPA. Current group capacity of 5.75 MTPA.

Captive power capacity of 61.35 MW (includes18 MW Thermal power plant is under implementation, expected commissioning March 2019).

Strong presence across all five southern states; Expanded presence to Maharashtra and Odisha.

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Shareholding Pattern as at 30 September 2018
Public holding includes
AvH Group’s ~17.6%
stake
Public
32%
Promoters
50%
Institutions
18%
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Manufactures Ordinary Portland Cement (OPC) of 53 & 43, Portland Pozzalona Cement (PPC), Sulphate Resistant Cement (SRC) & Portland Slag Cement (PSC)

Note: *Promoter group holding of 50% includes 1.5% held by APIDC

Strong brand built over the last 3.5 decades – “Sagar Cement”

AvH Resources India Pvt. Ltd., a wholly owned subsidiary of Ackermans & Van Haaren NV belonging to AvH Group, a Belgian major with revenues of ~EUR 5.4 billion is currently holding 17.6% equity stake in the Company.

High focus on technology and process efficiencies; High levels of Corporate Governance standards

Partnered with Vicat to set up a 5.5 MTPA greenfield plant. Exited JV in 2014 and realised INR 4,250 million from the stake sale

Capital Market Metrics

*Market price at close on 5 Dec 2018

Acquisition Update – December 2018

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Sagar Cements Overview

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Sagar Cements - Mattampally
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SC (R) - Gudipadu
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Sagar Cements - Bayyavaram
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SC (R) Power Plant
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• Fully integrated & automated facilities

• Distribution – Strong network of ~2,150 dealers; Channel Mix – Trade 70% : Non Trade 30%

• Track Record of consistent profits, successful inorganic and organic expansion initiatives

• Strong Financial Performance: FY18 revenue stood at INR 10,358 mn with an EBIDTA of INR 1,490 mn

• H1 FY19 revenues stood at Rs. 5338 Mn; EBITDA of Rs. 587 Mn

Note: BMM Cements acquired in 2015 has been re-named as Sagar Cements (R) Limited – SC (R)

Cement Capacity

1) Currently 1 MTPA, 0.25 MTPA to be added by Sep’18;

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Mattampally
WHRS -8.80 MW
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LIS Hydro
-4.00 MW
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Mattampally WHRS -8.80 MW
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GBC Hydro – 4.3 MW
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Acquisition Update – December 2018

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Sagar Cements Overview : Market Footprint

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Strategically located to reap a significant locational advantage

Well positioned to capture recovery in south with key strategic expansion initiatives

• Bolstered the strong presence across key southern markets with the acquisition of SCL(R) – shorter lead distances to Karnataka, TN and Kerala

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►
expansion.
Sagar
Sagar - Bayyavaram
SC(R)
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• Expanded towards East with the acquisition of Bayyavaram and its subsequent expansion.

Acquisition Update – December 2018

5

Business Objective

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Doubling of Capacity 8.25 MTPA • To Add 1.0 MTPA through the proposed acquisition in Madhya Pradesh. • every 10 2021 To Add 1.5 MTPA through proposed acquisition in Orissa.. years 5.75 MTPA • Ramped up production at Bayyavaram Unit to 1.5 MTPA. 2018 • Ramped up production at SC(R) to 1.25 MTPA

• Consolidated position in the South & made inroads into the East.

4.3 MTPA 2017 4.0 MTPA 2015

• Acquired Bayyavaram unit in 2016 and gradually ramped up its capacity to 0.3 MTPA. From the surplus cash flow generated through its stake sale in Vicat JV, SCL acquired 1 MTPA plant from BMM Cement.

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2.75 MTPA
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With over 30 years of quality focused operations, the Company has established strong brand in the market.

2014

Acquisition Update – December 2018

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Proposed Acquisition : Satguru Cement Private Limited Overview

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Sagar Cements
Promoters Capacity
Limited
2,200 TPD (0.7
Clinker
35% Satguru Cement 65% MTPA)
Private Limited Cement 3,000 TPD (~1 MTPA)
Along with WHR
Power Plant
Project funding
Term Debt INR 2,750 mn
Equity INR 1,500 mn
Total project cost INR 4,250 mn
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Bhopal (315 kms)
Indore (110 kms)
Proposed acquisition
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Accessibility

Key Highlights

• SCL will fund the entire equity portion capex for the construction of a ~1 MTPA facility along with captive WHR power plant

• Addition of around 60 mn tons of limestone reserves

• Basic civil structures available with the existing plant can be utilized for the project

Nearest Railway Station: Dhar - 55kms Nearest City: Indore - 110kms Nearest Highway: NH47 (Bamanbore-Nagpur) - 30kms Nearest Airport: Indore - 110kms Nearest River: Narmada - 40kms

• 2-year estimated construction period

Acquisition Update – December 2018

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New addressable markets

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Systematic expansion into new markets

Among the largest cement clusters in India

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Potential Market
Potential
South-East
Market
Rajasthan
East West Madhya ►
Pradesh
Gujarat
Existing ►
Market
►
►
North
Maharashtra
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Favorable industry dynamics and strong growth potential

Distance to Nearest Cities

• Indore – 110 Km

• Vadodara – 260 Km

• Bhopal – 315 Km

• Ahmedabad – 330 Km

Acquisition Update – December 2018

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Proposed Acquisition : Jajpur Cement Private Limited Overview

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Sagar Cements
Capacity
Limited
Cement 1.5 MTPA
100%
Jajpur Cement Private Limited Product Mix PSC – 90%
(JCPL) PPC – 10%
Project funding
Term Debt INR 2,000 mn
Equity INR 1,080 mn
Total project cost INR 3,080 mn
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Cuttack (83 kms) Proposed acquisition
Bhubaneswar
(105 kms)
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Accessibility
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Key Highlights

• JCPL has been allocated ~27 acres of land in the Kalinga Nagar Industrial Area, Jajpur.

• SCL will acquire the entire shareholding from the current promoters and obtain requisite approvals to construct a 1.5 MTPA cement grinding facility.

• Clinker will be sourced from the Matampally plant of SCL

Nearest Railway Station: Jajpur - 8kms Nearest City: Cuttack - 91kms Nearest Highway: NH20 alongside the industrial area Nearest Airport: Bhubaneswar - 108kms Nearest River: Brahmani - 20kms

Acquisition Update – December 2018

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New addressable markets

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Systematic expansion into new markets

Fast growing cement market with favorable industry dynamics.

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Potential Market
Potential
Southern Market
Jharkhand
Southern
West Bengal
Eastern
Chhattisgarh ►
North and ►
Existing
Central Odisha
Market ►
►
►
►
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Close proximity to North coastal Odhisha, West Bengal, Jharkhand & Chhattisgarh.

Distance to Nearest Cities

• Bhubaneshwar – 105 Km

• Cuttack – 83 Km

• Balasore – 129 Km

• Kolkata – 375 Km

• Ranchi – 375 Km

• Jamshedpur – 283 Km

Acquisition Update – December 2018

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Acquisition Benefits

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Both plants located in an attractive
regions with a strong growth potential
Access to new markets with
Enhanced scale of
attractive margins
operations
Addition of limestone Expanded group presence will reduce
reserves Benefits effects of region-specific risks
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Acquisition Update – December 2018

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Financial Implications

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Debt secured at 10.25 % ;
repayable over 12 years
Incremental debt for
475
new projects
In Rs. cr
Equity infusion for new projects 258
In Rs.cr
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Total Term Debt for the
727
group in FY 2021
In Rs. cr
Pre(FY19)
Group's D/E post said 0.48 Post(FY21)
acquisitions / implementation 0.59
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*Based on current business position and plans

Acquisition Update – December 2018

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