Sagar Cements zooms 20% on stock split plan; stock nears record high

The board is scheduled to meet on July 01, 2021, to consider a proposal to sub-divide (split) the face value of the equity shares of the Company from Rs 10 each into an appropriate amount

Shares of Sagar Cements zoomed 20 per cent to Rs 1,032.15, hitting a fresh 52-week high, on the BSE in intra-day trade on Tuesday after the company announced stock split plan. The stock of the cement and cement products company was trading close to its record high level of Rs 1,161 touched on January 4, 2018.

"The board of directors of the Company is scheduled to meet on July 01, 2021, inter-alia, to consider a proposal to sub-divide (split) the face value of the equity shares of the Company from Rs 10 each into an appropriate amount,” Sagar Cements said in exchange filing.

Generally, a company plans to go for a stock split to make the shares more affordable for small retail investors and increase liquidity. In the past one year, the stock of Sagar Cements has zoomed 200 per cent as compared to a 59 per cent rally in the S&P BSE Sensex.

Meanwhile, on June 10, 2021, rating agency India Ratings and Research (Ind-Ra) had upgraded Sagar Cements’ (SCL) long-term issuer rating to ‘IND A’ from ‘IND A-’ with positive outlook.

"SCL reported a significantly stronger-than-expected performance in financial year 2020-21 (FY21), reporting an EBITDA (earnings before interest, taxes, depreciation, and amortisation) of Rs 400 crore (FY20: Rs 190 crore). While the company’s volumes declined by 32 per cent year on year (YoY) in Q1FY21 due to the impact of the Covid-19-led disruptions, it witnessed a swift recovery in the subsequent quarters, growing by 2 per cent YoY, 13 per cent YoY and 22 per cent YoY in Q2FY21, Q3FY21, and Q4FY21, respectively," the agency said.

Ind-Ra now expects SCL’s profitability to moderate in FY22 from the high base of FY21, although it would remain at healthy levels.
"SCL's EBITDA/t sequentially moderated to Rs 1,019 in 4QFY21 from Rs 1,450-1,550 levels in 1HFY21 due to a decline in prices along with an increase in input costs. From being primarily a southern India-based player, the company will be able to develop a presence in the faster-growing eastern India market and the more profitable central India market, which bodes well for its future profitability," the rating agency added.

SCL is planning to merge its wholly owned subsidiary Sagar (R) with itself, for which the board approval was received in April 2021.  This is likely to lead to a simplified structure, resulting in the optimisation of operational and administrative costs, modest operational synergies, and easing of statutory compliances. The company is also likely to merge Jajpur Cement, in which it holds 100 per cent stake, in the future, Ind-Ra said.

At 10:32 am, SCL was trading 18 per cent higher at Rs 1,017 on the BSE, as compared to a 0.57 per cent rise in the S&P BSE Sensex. Trading volumes on the counter jumped an over five-fold with a combined around 430,000 shares having changed hands on the NSE and BSE till the time of writing of this report.