India Cements sells non-core assets, but investors are not impressed

Investment in non-core businesses and increased debt have been a problem for investors in India Cements. In view of this, this step is a step in the right direction. Then why aren’t investors excited?

This is because the deal alone is unlikely to help India Cements see a meaningful de-leveraging.

Analysts at Nuvama Institutional Equities say higher selling of such non-core assets, mainly huge land banks, is the key to material leverage. Nuvama’s report said, “As per the management’s observations in the past, ICEM has a land-bank of approximately 27,000 acres at various locations in South India. The sales of these non-core properties are driving significant re-ratings of the stock.” be important for.” Date 11 October. Operationally, FY23 is proving to be one of the toughest years for India Cements, with Ebitda/tonne projected to fall to a multi-year low, the report said. 300. Ebitda is short for earnings before interest, tax, depreciation and amortization.

Therefore, the brokerage house is of the view that the sale of such non-core assets, mainly huge land banks, is the key to driving material de-leveraging.

In an October 10 press release, the company said it had received cash 373.87 crore and the rest 103 crores will be received before 31st December 2022.

Investors would recall that India Cements stock saw a sharp jump recently despite its poor fundamentals.

“Despite significant pressure on earnings, the stock has risen on expectations of consolidation in the cement sector (up 42% since 1Q results), said analysts at Motilal Oswal Financial Services.

The company’s valuation appears unattractive at 15.8 times FY24E EV/Ebitda and 82 EV/tonne, given the absence of capacity addition plans and higher net debt/Ebitda, the report said.