Mines in Tamil Nadu will now attract additional tax, dealing a fresh blow to The Ramco Cements Ltd, which focusses on south India. Under the Tamil Nadu Mineral Bearing Land Tax Act 2024, the Tamil Nadu government has notified the levy of a mineral-bearing land tax of ₹160 per tonne on limestone in the state, effective 20 February. This tax must be paid in advance on dispatch of minerals and is in addition to the royalty charged for limestone mining.
Costs of production for cement makers with exposure to this region will rise, hurting earnings outlook. With about half of its total clinker capacity in Tamil Nadu, Ramco is seen as the worst-affected among its listed peers.
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“Regional concentration of The Ramco Cements places it at a disadvantage versus other listed peers like Dalmia Bharat/UltraTech Cement/Ambuja Cements, which have 25%/3%/1% of aggregate clinker capacity in Tamil Nadu,” said a Kotak Institutional Equities report dated 12 March. It has trimmed Ramco’s FY26 and FY27 Ebitda estimates by 5% and 4%, respectively, led by higher costs.
Tailwinds fading
This comes at a time when margin tailwinds for the sector are fading as the cost of petroleum coke, a key fuel, have started to inch up. While this would hurt the entire sector, it puts Ramco in a particularly tight spot. That’s because, as Elara Securities (India) pointed out, while Ebitda per tonne for its peers rose sequentially in Q3FY25, Ramco’s fell about ₹56 to ₹653 owing to weak pricing in its core south India market.
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True, passing on the burden to customers could partially offset cost pressures, but so far, pricing trends in the south have been particularly disappointing. There’s little scope for meaningful price hikes since the region faces overcapacity amid heightened competition. The intense fight for market share gains on increased merger & acquisition activities in the south has meant that larger cement companies continue to prioritise volumes over realisations.
Like its rivals, Ramco is expanding clinker and grinding capacities and aims for 30 mtpa of capacity by FY26 from the current 24 mtpa. It is also paring debt by monetising non-core assets. Improving business conditions in south India could aid earnings visibility and ease the pressure on the stock, which trades at a high EV/Ebitda multiple of about 14 times based on FY26 estimates, according to Bloomberg.
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