ACC's Margin Halved; Ambuja MSA's EBITDA Effect Unsized

ACC's operating EBITDA margin fell to 7.0% in the September quarter from 14.1% a year earlier, and EBITDA per tonne to ₹414 from ₹849 (consolidated; ACC's own measures). Vinod Bahety, Whole-time Director and CEO of ACC Limited, says the reported numbers "are not strictly comparable due to the impact of MSA", a reference to its Master Supply Agreement with its holding company Ambuja Cements, as ACC's earlier filings name it ([G]; [F] p.7). No document we read sizes the effect of that agreement on ACC's EBITDA. The filings do show where the money went line by line, a ₹4,403 crore loan to Ambuja, suspended plants, and a merger heading to the tribunal.

The idea in one sentence

Our reading: ACC's quarter is less a verdict on a cement franchise than a snapshot of a subsidiary run inside a group, and the one item the company says breaks comparability is the one item the documents we read do not size for ACC's EBITDA.

The fact that breaks the assumption

A margin that halves usually points at price or volume. Volume barely moved. All figures are Q2 FY27 against Q2 FY26, consolidated ([B] p.2-3; [A] p.12-13):

Volume fell 2.8% and revenue 5.3% (our arithmetic), while operating EBITDA fell by ₹445 crore, about 53% (our arithmetic). The release's footnote 2, "Higher MSA volume with parent Ambuja Cements", is attached to the FY27 EBITDA figures, not to last year's ([B] p.3).

One nearby line complicates the story. The margin did not start falling in Q2. In Q1 FY27 operating EBITDA was ₹457 crore on revenue of ₹5,808 crore, a 7.9% margin ([B] p.3; [C] p.1), against 12.3% in Q1 FY26 (our arithmetic from the half-year columns). The Q1 release named two things: "planned maintenance of larger Integrated Units" and "higher MSA with parent Ambuja Cements" ([C] p.1). The Q2 comment on comparability names only the MSA. For the half year the margin was 7.5% against 13.2% ([B] p.3).

One concrete thing, followed: ₹4,403 crore

Note 11 to the results says that, with shareholder approval dated 1 April 2026, ACC gave inter-corporate deposits (ICDs) aggregating ₹4,403 crore, including ₹503 crore in the quarter, to "the Ultimate Holding Company, Ambuja Cements Limited". They carry 8% a year and are "repayable on or before March 31, 2027" ([A] p.19 consolidated; p.8 standalone). The consolidated cash flow shows "Loan to Ultimate Holding Company (4,403)" in investing activities for the half year ([A] p.15), and current loans stand at ₹4,409 crore against ₹6 crore at 31 March 2026 ([A] p.14).

ACC's net worth is ₹20,680 crore ([B] p.3), so the loan is about 21% of it (our arithmetic). At 8% for a full year, ₹4,403 crore would earn about ₹352 crore of interest (our arithmetic); the results do not show the interest earned on it as a separate line. The Q2 documents do not say why the loan was made. ACC's postal-ballot notice does: it sought approval for deposits to Ambuja of up to ₹5,500 crore including interest, "Unsecured", with maturity "Not exceeding one year", funded from "Internal accruals", describing them as "a temporary arrangement to optimize the use surplus funds without undertaking any lending/investment risk" pending the amalgamation ([F] p.14, p.16, p.26). The resolution, which also covered the FY27 transactions under the MSAs, passed with 83.70% of the votes cast, the promoter group not voting ([J]).

Management was asked on Ambuja's Q1 call on 28 July. Vinod Bahety, listed there as Chief Executive Officer of Ambuja Cements Limited, said the deposits were "well within the approved limits of the shareholders" with a coupon of 8%, and "it's one platform" ([D] p.14). Asked separately why ACC and Orient lent to the parent, he said: "part of the whole MSA commitment because Ambuja has the higher share of the capacity and therefore, like Ambuja is supplying the material" ([D] p.17). He went on: "This time you have seen that almost 1.6 million to 2 million tons of cement has been supplied. 3 million has been supplied to ACC by Ambuja." ([D] p.17). The transcript does not make the period or the split clear, and ACC's own filings give no MSA tonnage for Q2. On the Q4 FY26 call (4 May) he had said "ACC has receivable from Ambuja under the MSA" and that "this will get knocked off with the ICD" ([H] p.11). On the CEO's account, then, the deposits and the MSA balances are connected. These are remarks, not figures in a filing.

The mechanism: what the documents carry, and what they do not

What is on the page:

• ACC says the margin comparison is distorted by "MSA" ([B] p.1). The release does not define the term. ACC's earlier filings do: a 2021 letter to the exchanges calls it the "Master Supply Agreement" with Ambuja ([G]), and the March 2026 notice calls the contracts the "Master Supply Agreement and Master Service Agreement" ([F] p.7).
• That notice lists what is bought and sold under the MSAs: cement, clinker, raw materials, ready-mix concrete, power, admixtures and building materials, aggregates, and stores and spares, plus services, leases and reimbursement of expenses ([F] p.16). It gives ACC's total related-party transactions with Ambuja as ₹6,896.72 crore in FY 2024-25 (purchases of goods and fuel ₹3,125.63 crore, sales of goods ₹3,278.03 crore) and ₹6,284.89 crore for April to December 2025, and sought approval for ₹22,000 crore under the MSAs in FY 2026-27 ([F] p.15-16). These are totals for all transactions with Ambuja, not the Q2 FY27 MSA volumes and not a margin effect.
• Ambuja's Q1 presentation deducts "Cement Sales (under MSA)" of 6.7 million tonnes for the June 2026 quarter, against 6.4 million a year earlier, from the gross sales of Ambuja, ACC and Orient to reach net cement sales ([E] p.24). That is a group-wide figure, for Q1.
• On the same call Mr Bahety said, in answer about Orient Cement, that standalone results look different "given the MSA treatment" and "we'll have to factor those MSA treatments and then look at it" ([D] p.31). He was talking about Orient, not ACC.
• ACC's employee costs are net of costs allocated to or from its holding company under cost-sharing arrangements (Note 7, [A] p.18).

Our reading, labelled as such: when cement moves between companies of one group under a contract, the contract's terms help decide which company books the profit on it, so a single subsidiary's per-tonne margin can partly reflect those terms. Nothing we read gives the price, the Q2 tonnage or direction of flow for ACC, or the effect on ACC's EBITDA.

What the filings do let us do is rebuild the fall from ACC's own lines. Operating EBITDA is revenue including grants less costs before depreciation and finance costs, and it reconciles exactly (our arithmetic). Change from Q2 FY26 to Q2 FY27, consolidated, in ₹ crore ([A] p.12):

Inside the first cost line, purchases of stock-in-trade rose from ₹1,542 crore to ₹1,786 crore while materials consumed fell from ₹1,089 crore to ₹938 crore. Note 10 says coal sales are now shown in revenue and the related coal cost in purchases of stock-in-trade, with prior periods regrouped ([A] p.19). So we cannot read that line as cement bought from Ambuja. The results do not say which lines the MSA touches. The notice lists the categories above, and Chief Financial Officer Rohit Soni said on the Q3 FY26 call that the coal grossing-up arose "because of the MSA" ([I] p.10).

Two more pieces of the picture. The cement and ancillary services segment result fell to ₹83 crore from ₹541 crore, while ready-mix concrete rose to ₹49 crore from ₹32 crore ([A] p.13). The company's own operating metrics show kiln fuel cost of ₹1.81 per '000 kCal against ₹1.57 (about 15% higher, our arithmetic), though the power and fuel line fell in rupees ([B] p.2).

The profit comparison has a distorted base

Profit after tax was ₹93 crore against ₹1,119 crore. The year-ago figure is footnoted as including a ₹659 crore income-tax provision reversal and ₹205 crore of interest on an income-tax refund ([B] p.3; Note 5, [A] p.17). One mismatch we could not close: the results table shows a "tax write back relating to earlier periods" of ₹671 crore for Q2 FY26 ([A] p.12), while Note 5 and the release say ₹659 crore. Profit before tax was ₹124 crore against ₹763 crore. This year's figure is after a ₹71 crore exceptional charge and the year-ago figure includes the ₹205 crore, which Note 5 places in other income. Before the exceptional item, profit before tax was ₹195 crore; without the ₹205 crore, last year's would have been ₹558 crore (our arithmetic).

Plants and severance

Note 9 says management approved, in the June quarter, "temporary suspension of manufacturing operations at certain facilities pursuant to a strategic review of production facilities across India", and that no impairment is required because the closures are temporary ([A] p.19). The Voluntary Severance Scheme cost ₹71 crore in Q2 and ₹24 crore in Q1, ₹95 crore for the half year, shown as exceptional items, covering "third party workforce and permanent employees" ([A] p.16). Because exceptional items sit outside operating EBITDA, the ₹71 crore is not part of the ₹445 crore fall above (our arithmetic).

The Q2 documents do not say which plants or how much capacity. On the Q1 call, asked what capacity had been shut down, Mr Bahety gave "3.5-odd million tons of annual capacity" ([D] p.17); a later analyst question put about 6.5 million tonnes and four named plants to him, and he did not confirm a figure ([D] p.27). He said the facilities were "very old facilities of ACC, some of them and one facility also of an acquired company" ([D] p.21).

The merger

Shareholders voted on 29 September; the release says over 95% and 99% of votes cast by ACC and Ambuja shareholders respectively were in favour. The joint petition went to the NCLT on 1 October, and by order of 8 October the NCLT fixed 19 November 2026 for hearing it ([A] p.17; [B] p.3). Completion is "expected during FY’27", subject to regulatory, statutory and NCLT approvals, which is the company's expectation, not a fact.

Where this breaks

• Our reading may be wrong. The margin could be mostly operating: fuel cost per unit of heat, mix, and other expenses up 24% (our arithmetic) with no explanation in the documents. The MSA could be a small part. The Q1 release also named plant maintenance. Nothing we read splits the ₹445 crore.
• The Competition Commission case is real. A 2016 order imposed a ₹1,148 crore penalty for alleged cartelisation. ACC's appeal is in the Supreme Court under a stay conditioned on a 10% deposit. If the appeal is dismissed, interest of 12% a year runs "from the date of the CCI order". The note lists the next hearing for 28 October 2026 (we have not seen an outcome) and a separate ₹35 crore matter before the NCLAT. ACC says it has "a strong case on merits" and has made no provision. The auditors "draw attention" to the uncertainty and say their conclusion "is not modified" ([A] p.18, p.22). It is a limited review, not an audit. The note gives no total. For scale only: simple interest on ₹1,148 crore for the ten years since the order would be about ₹1,390 crore (our arithmetic, assuming simple interest through 30 September 2026), so penalty plus interest would be about ₹2,540 crore against net worth of ₹20,680 crore.
• The loan concentrates risk in one counterparty. Ambuja is both the lender's owner and the borrower. The notice says the deposits are unsecured ([F] p.26); the results do not say how they are treated if the merger takes effect.
• One quarter is one quarter. Q1 shows the same footnote and a similar margin, and the half year agrees, but we have no Q2 MSA figures for ACC itself and have not seen Ambuja's Q2 numbers.

Why it costs the reader something

A cost-advantage claim rests on per-tonne economics. If part of a subsidiary's per-tonne margin comes from an internal contract, the reported figure measures the contract as well as the plants, and a reader who treats ₹414 a tonne as ACC's standalone cost position is using a number its own company says is not comparable. MoatSCORE (provisional, first-pass) 5.74 on our Moat Screener (https://www.moatmarginresearch.com/moat-screener/; moat page: https://www.moatmarginresearch.com/acc-moat/). In our reading, any score that leans on ACC's reported margin carries this caveat. ACC calls itself "part of the diversified Adani Portfolio" ([B] p.1); our 30 September piece on SEBI's public-shareholding settlement with companies of that portfolio covered a different matter and did not cover ACC ([AD]).

What to watch: Ambuja's own Q2 disclosures; any related-party disclosure from ACC that carries MSA values; the 19 November NCLT hearing; the outcome of the Supreme Court listing; and 31 March 2027, the date the ICDs are due.

Back to the ₹4,403 crore

The loan has a number, a rate, a date and, per the notice, no security. The MSA, which the chief executive ties to the comparability of the margin and which management tied to the loan, has no price per tonne, no Q2 tonnage for ACC and no EBITDA effect in any document we read. Until it does, ACC's 7.0% is a figure to hold with the footnote attached.

Sources

Page references: [A], [D], [E], [F], [H] and [I] by PDF page; [B] and [C] by the release's own page numbers.

• [A] ACC, Q2 FY27 results, notes and auditors' review reports (NSE)
• [B] ACC, Q2 FY27 media release (NSE)
• [C] ACC, Q1 FY27 media release (company website)
• [D] Ambuja Cements, Q1 FY27 earnings call transcript, 28 July 2026 (company website)
• [E] Ambuja Cements, Q1 FY27 investor presentation (company website)
• [F] ACC, postal ballot notice, 28 January 2026 (NSE; PDF page)
• [G] ACC, letter on the Master Supply Agreement with Ambuja, 18 February 2021 (NSE)
• [H] Ambuja, ACC and Orient, Q4 FY26 earnings call transcript, 4 May 2026 (company website; PDF page)
• [I] Ambuja, ACC, Orient and Sanghi, Q3 FY26 earnings call transcript, 30 January 2026 (company website; PDF page)
• [J] ACC, postal ballot voting results, 2 April 2026 (NSE)
• [AD] Moat & Margin, SEBI public-shareholding settlement
• [MS] Moat & Margin, Moat Screener and ACC moat page

Educational research, not investment advice. Every figure above is drawn from ACC's and Ambuja Cements' own documents, read from the primary documents on 28 October 2026; derived figures are our arithmetic, labelled as such. MoatSCORE read live from the Moat Screener on 28 October 2026 and is provisional. No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.