Markets India

Ambuja Cements reported a 90% year-on-year drop in Q2 FY27 net profit to Rs 114 crore, driven by a Rs 1,697 crore income tax provision reversal, while revenue grew 10% to Rs 6,113 crore, according to ET Markets.

Ambuja Cements Q2 Net Profit Plummets 90% on Tax Reversal, Revenue Rises 10%

The sharp decline in net profit underscores the significant impact of the tax reversal on Ambuja Cements' financials, which distorted profitability in the quarter. Revenue from operations increased 10% to Rs 6,113 crore, up from Rs 5,579 crore in Q2 FY26. The tax reversal, which amounted to Rs 1,697 crore in the year-ago period, overshadowed the revenue growth. EBITDA margins fell to 13.8% from 19.2% in the same period last year, reflecting pressure on operational efficiency. Cement sales volume remained stable at 16.5 million tonnes, while trade volumes grew 8.6% YoY and trade share expanded to 74%. Premium products accounted for 37% of trade sales, up 2 percentage points from the prior year.

The company added 4.6 MTPA of production capacity in Q2 FY27, with an additional 5.6 MTPA expected to come online in H2 FY27. Ambuja aims to meet a cost target of Rs 4,250 per tonne by FY27. The amalgamation of ACC and Orient Cement, approved by shareholders, is set to complete in FY27, potentially boosting scale and market share. However, regulatory scrutiny over antitrust compliance could delay the merger.

The tax reversal raises questions about the sustainability of earnings without similar adjustments. Rising energy costs and geopolitical tensions pose risks to demand growth. Meanwhile, the merger and premium product growth offer opportunities to strengthen competitive positioning. A debt-free balance sheet supports disciplined capital allocation, but the company faces uncertainty over the tax reversal's recurrence and regulatory approval timelines.

The amalgamation of ACC and Orient Cement is expected to finalize in FY27, with the industry anticipating further price increases following a recent Rs 10-15 per tonne hike.

Ambuja Cements' Q2 results highlight the outsized impact of the tax reversal on profitability, but the merger and premium product growth present strategic advantages. The key uncertainty remains whether the tax reversal will recur and how regulatory approvals will affect the merger timeline.

Topics: Cement Industry, India Markets, Ambuja Cements, Tax Reversal, Merger Integration, EBITDA Margins, Premium Products, Revenue Growth

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Source: ET Markets