Detailed Rationale

Crisil Ratings has reaffirmed its rating on the long-term bank facilities of Shiva Cement Limited (SCL) at ‘Crisil A+/Stable’.

 

The company is a subsidiary of JSW Cement Ltd (JSWCL; ‘Crisil A+/Stable/Crisil A1’) and has clinker manufacturing capacity of 1.4 MTPA in Odisha along with captive limestone mines. It and thus is crucial to the parent.

 

The ratings factor in the high strategic and economic importance of SCL to JSWCL, as SCL supplies a large part of its clinker to the grinding units of JSWCL in the east region. Further, the ratings continue to factor in the support of JSWCL towards SCL, as reflected in history of equity infusion (with the most recent infusion of ~Rs 318 crore undertaken as part of the rights issue in May 2024), loans outstanding to SCL (Rs 640 crore as of March 31, 2025), and extension of unconditional and irrevocable corporate guarantee to term loans of SCL. These strengths are partially offset by exposure risks arising out of geographical concentration, modest scale of operations and weak financial risk profile.

 

The business risk profile of SCL is marked by adequate market position and operating efficiency post operationalisation and ramp up of 1.4 MTPA clinker unit. SCL achieved utilisation levels of more than 90% during the fourth quarter of fiscal 2025. Profitability moderated during fiscal 2025 with company reporting operating losses due to subdued realisations across the industry. Profitability is expected to improve in fiscal 2026 supported by better pricing and sustained healthy utilization levels and will remain a key monitorable. Further, the business risk profile will be supported by incremental earnings before interest, tax, depreciation and amortization (Ebitda) from dolomite sales, starting second half of fiscal 2026 (delay of 12 months from earlier expectations).

 

Crisil Ratings notes that Bhushan Power and Steel Ltd (BPSL) was setting up a 1 MTPA grinding unit in Odisha for and on behalf of SCL, which was expected to be commissioned by September 2025. SCL had advanced ~Rs 125 crore to BPSL for this project as on March 31, 2025. However, the Supreme Court’s judgement of May 2, 2025 ordering liquidation of BPSL will hinder further capex and operationalisation of this grinding unit. Crisil Ratings believes that even in absence of the planned grinding unit, SCL will be able to generate adequate profits from its clinker and dolomite sales. Also, SCL remains a creditor of BPSL and as per the company’s management, it will be eligible to get compensated for its investments in the event of liquidation. Any significant developments in this regards will remain a monitorable.

 

The company’s networth turned positive as on March 31, 2025 aided by rights issue undertaken in May 2024. Nonetheless, continued losses owing to low scale of operations and high interest cost on the debt undertaken will lead to networth erosion and keep the debt protection metrics weak till the time its profitability improves. However, Crisil Ratings understands that the interest on the promoter loans is getting accrued and not paid, which provides some comfort. Further, SCL has adequate financial flexibility on account of its strong parentage and minimally utilised bank lines.

Analytical Approach

For arriving at the ratings, Crisil Ratings has analysed the business and financial risk profiles of SCL. Further, it has applied its parent notch-up framework to factor in the support from JSWCL.

 

Additionally, unsecured loans of Rs 640 crore from the promoter, JSWCL, has been treated as neither debt nor equity as these loans are subordinated to all external borrowings, expected to remain in the business over the medium term and interest is repayable along with the principal at the end of the tenure. The tenure of the loan is also extendable.

Key Rating Drivers & Detailed Description

Strengths:

• Strategic importance of SCL to JSWCL and continued strong support from the parent: As on December 31, 2023, JSWCL held 59.59% equity stake in SCL, which increased to 66.17% post the Rights issue in May 2024. Thus, JSWCL continues to have sizeable control over SCL’s operations. JSWCL has also extended support to SCL by infusing funds into the company to support its liquidity as and when required. For instance, in fiscal 2021, JSWCL infused Rs 100 crore by subscribing 1% optionally convertible cumulative redeemable preference shares of SCL, and further during the Rights issue when it infused ~Rs 318 crore. It has also supported the company in the past through significant advances and intercorporate deposits. Outstanding loans from JSWCL to SCL stood at around Rs 640 crore as on March 31, 2025. The parent continues to maintain its stance of financial and managerial support, given the strategic importance of SCL to JSWCL.

 

The clinker unit in SCL is strategic from JSWCL’s perspective as the 1.4 MTPA clinker plant will meet the clinker requirement of the grinding units of the parent in east India (viz Jajpur in Odisha and Salboni in West Bengal). Thus, there are strong operational linkages apart from financial support extended by JSWCL.

 

The credit risk profile of JSWCL is driven by its strong business risk profile following geographic diversification in revenue and high operating efficiency. The financial risk profile of the parent improved after raising equity from private equity investors and is expected to be supported by higher accruals from new capacity, while the business risk profile continues to strengthen with commissioning of new capacity and ongoing capacity addition. The credit risk profile of JSWCL also factors in the support it receives from the JSW group and the financial flexibility it enjoys from being part of the group.

 

• Backward integration in terms of captive limestone mines: SCL has captive limestone (key raw material) mines in Khatkurbahal, Odisha, which have mining life of more than 40 years and adequate reserves to meet existing as well as post-expansion requirements. The reserve in the eastern region is important as cement players there mostly procure clinker from Chhattisgarh or south India. The location of the mines is also strategic (about 12 km from the plant) and helps reduce freight cost.

 

Weaknesses:

• Exposure to project implementation risk: SCL is undertaking a capital expenditure (capex) of around Rs 450 crore over fiscal 2025 to 2027. The capex includes setting up a 1.05 MTPA grinding unit, railway siding inside clinker plant, around 12 km railway track for transportation of finished goods and around 7 km overland belt conveyor to transport limestone from mines to the plant. The cement unit is expected to be commissioned in the first half of fiscal 2026. This exposes the company to project risk given its small scale of operations and will be monitorable.

 

• Modest scale of operations and continued losses: SCL commissioned its clinker unit in June 2024. However, modest utilisation levels in fiscals 2024 and 2025 and high interest burden on the outstanding debt in the company resulted in SCL continuing to report profit after tax (PAT) losses since commissioning. Also, the company remains susceptible to risks arising from low scale of operations in a single geography.

 

• Weak financial risk profile: Debt protection metrics remain weak owing to continued losses leading to erosion of networth. However, with expected improvement in operating performance going forward, the debt protection metrics are expected to gradually improve over the medium term.

Liquidity: Strong

The liquidity of SCL derives strength from the overall liquidity of JSWCL owing to the support extended by JSWCL to SCL. Further, with presence of corporate guarantee on Rs 850 crore of term loan towards the capex and additional Rs 250 crore loan towards the grinding unit planned earlier, JSWCL is likely to provide financial support in the event of exigency in a timely manner.

 

As part of the JSW group, JSWCL enjoys financial flexibility. Cash and equivalent stood at Rs 306 crore as on March 31, 2024, along with moderately utilised fund based working capital limits. Furthermore, as part of the JSW group, JSWCL has adequate financial flexibility to raise funds to service debt obligations in a timely manner.

Outlook: Stable

The outlook on the long-term bank facilities of SCL reflects Crisil Ratings’ view of ‘Stable’ outlook on the credit risk profile of JSWCL.

 

Crisil Ratings believes JSWCL will continue to benefit from healthy operating efficiency, increasing geographic presence with operationalisation of new capacities and overall healthy demand outlook for the cement sector.

Rating sensitivity factors

Upward factors

• Improvement in the overall credit risk profile of the parent by 1 notch or more

 

Downward factors

• Downward revision in JSWCL’s long-term rating by 1 or more notch and/or change in shareholding/support philosophy toward SCL
• Significant deterioration in SCL’s operating performance

About the Company

SCL was incorporated in 1985 and the first commercial production commenced in 1986. The manufacturing facility is in village Telangana (Kutra), District Sundargarh (Odisha) and limestone mines are in Khaturbahal (Odisha). The company was acquired by JSWCL in fiscal 2017 and became its subsidiary thereon. Its natural marketing territory is Odisha, West Bengal, Jharkhand and Bihar. SCL brands its cement Mahabal, which consists of both Portland Slag Cement (PSC) and Portland Pozzolana Cement (PPC). As on December 31, 2023, SCL has clinker capacity of 1.3 MTPA (4,000 tpd) and waste heat recovery (WHR) plant of 9 MW.

About the Parent

JSWCL was incorporated in 2006, and its first unit of 0.6 mtpa grinding capacity in Vijayanagar was commissioned in fiscal 2009. Presently JSWCL has cement manufacturing capacity of 20.6 mtpa spread across south (11.0 mtpa), west (4.5 mtpa) and east (5.1 mtpa) India. It manufactures various grades of cements such as PSC (Portland Slag Cement), OPC (ordinary portland cement), CHD (Concreel HD), GGBS (ground granulated blast furnace slag) and CPC (composite cement).

Any other information: Not Applicable