The Ramco Cements Ltd faces a fresh challenge as Tamil Nadu introduces a new mineral-bearing land tax under the Tamil Nadu Mineral Bearing Land Tax Act 2024. Effective February 20, the state government has imposed a levy of Rs 160 per tonne on limestone, payable in advance upon dispatch. This tax adds to the existing royalty on limestone mining, further increasing costs for cement manufacturers operating in the region. With nearly half of its clinker capacity located in Tamil Nadu, Ramco is expected to be the most affected among its listed peers. A Kotak Institutional Equities report on March 12 highlighted that Ramco’s regional concentration puts it at a disadvantage compared to competitors like Dalmia Bharat, UltraTech Cement, and Ambuja Cements, which have significantly lower exposure to the state. As a result, Kotak has cut Ramco’s EBITDA estimates for FY26 and FY27 by 5% and 4%, respectively, due to higher costs. The tax hike comes at a time when margin tailwinds for the cement sector are fading. The cost of petroleum coke, a key fuel, has started rising, further squeezing profitability. While cement makers across India are impacted, Ramco is particularly vulnerable. According to Elara Securities (India), Ramco’s EBITDA per tonne declined by Rs 56 to Rs 653 in Q3FY25, even as its peers saw sequential growth, reflecting weak pricing conditions in the southern market. Although companies may try to pass on the added costs to consumers, pricing trends in South India remain unfavourable. Overcapacity and intense competition—driven by increased mergers and acquisitions—have kept price hikes in check, as larger players prioritize volumes over margins. Despite these challenges, Ramco is continuing its expansion, aiming to increase clinker and grinding capacity to 30 million tonnes per annum (mtpa) by FY26 from the current 24 mtpa. The company is also reducing debt by monetizing non-core assets. While improving market conditions in South India could provide some relief, Ramco’s stock remains under pressure, trading at an elevated EV/EBITDA multiple of around 14 times based on FY26 estimates, according to Bloomberg. (Mint)