Pan-India focused cement manufacturer Ultratech Cement Ltd has prepaid its long-term loans amounting to ₹5,000 crore, it informed the exchanges on Tuesday, post market hours.
The company said the loan repayments have been done through free cash flows that it has generated over the last few quarters despite the challenging circumstances and severe business interruptions during the first quarter of the current fiscal.
It should be noted that this is in-line with the company’s target of becoming net debt-free by fiscal 2023. After Tuesday’s announcement, the company’s gross debt at the end of fiscal 2021 is likely to be around ₹18000 crore. The company’s net debt as of December quarter stood at ₹9400 crore, a steep decline from ₹16900 crore in FY20 end.
Analysts at Antique Stock Broking Ltd point out that the company’s peak net debt/Ebitda post the acquisitions stood at near three times in FY19, “which has fallen to 0.8times in 9mFY21”. Ebitda is short for earnings before interest, tax, depreciation and amortization.
“Such aggressive debt reduction on the back of improving operating profitability has led to sharp improvement in return ratios. ROCE/ROE are expected to reach mid-teens in FY22-23 after remaining sub-par for prolonged period for Ultratech,” the domestic broking house said in a report on 31 March. ROCE is short for return on capital employed. ROE stands for return on equity.
Meanwhile, shares of the companare trading at a one-year forward EV/Ebitda multiple of 15 times. EV stands for enterprise value. Ultratech is the second most expensive cement stock on this parameter, first being debt-free Shree Cement Ltd, which is trading at a multiple of around 21 times. Analysts expect the valuation gap between the two companies to narrow as Ultratech inches closer to achieving a debt-free status.
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