Deccan Cements faces sharper cost pressure

Deccan Cements has slipped into the red in the first quarter of FY27 despite a sharp increase in sales, as power, fuel and freight expenses eroded operating margins. The Telangana-based cement maker reported a standalone net loss of ₹7.39 crore for the quarter ended June 30, highlighting the pressure that elevated operating costs can place on smaller regional producers even when construction-material demand remains relatively resilient.

Revenue from operations increased to ₹219.34 crore from ₹150.56 crore a year earlier, an 11.8% rise. Yet the improvement at the top line did not translate into stronger profitability. Total expenses climbed to ₹233.68 crore, compared with ₹132.83 crore in the corresponding quarter, leaving the company with a pre-tax loss of ₹9.49 crore.The clearest warning comes from operating margins. EBITDA fell to about ₹16.8 crore from ₹27.9 crore, while the EBITDA margin dropped to 7.7% from 18.52%. Power and fuel costs reached ₹92.09 crore, up from ₹79.91 crore in the preceding quarter, while freight expenditure remained high at ₹45.13 crore. For a regional cement producer, these costs can quickly offset gains from higher volumes or selling prices.An additional burden came from a ₹2.27-crore provision related to a mineral-bearing land infrastructure cess following a demand from Telangana’s Department of Mines and Geology.

The charge further weakened the quarter’s bottom line, although the underlying deterioration in operating profitability was already substantial.The result matters beyond the company. Cement is a freight-intensive material, and producers with concentrated regional footprints can be particularly exposed to energy and transport costs. Industry analysts have also pointed to uneven pricing and cost conditions across India’s cement markets, even as housing and infrastructure investment support longer-term demand.Deccan Cements is simultaneously moving towards a larger production base. Its expansion project is intended to take installed cement capacity to about four million tonnes a year from the earlier 1.8 million-tonne level, with clinker capacity also being expanded. The project is located in Suryapet district, Telangana.That expansion creates both an opportunity and a financial test. Greater capacity can improve scale and regional supply, but it also increases exposure to electricity, fuel, logistics and financing costs.

Recent credit analysis has highlighted the company’s existing 2.2-million-tonne cement capacity and financial performance, underlining the importance of execution and balance-sheet discipline as expansion progresses.There is also a sustainability angle. The company has previously reported a 7 MW waste-heat recovery system, wind and mini-hydel generation, alongside the use of fly ash in blended cement. Such measures can reduce energy intensity and clinker dependence, but their economic value becomes more important when conventional power and fuel costs are under pressure.For Telangana’s construction economy, Deccan Cements margins will therefore be worth watching alongside capacity growth. The next challenge is converting additional production into durable profitability while improving energy efficiency and keeping cement supply competitive for housing and infrastructure projects.

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Deccan Cements faces sharper cost pressure