It’s been a rough 18 months for Chennai-based India Cements. In the year ended March 2023—a period ICICI Securities described as “one of the worst operating years” for the company—India Cements posted a net loss of Rs 125.1 crore. It followed this up by clocking a net loss of Rs 75.3 crore in the quarter ended June 2023.

It has also racked up substantial borrowings. Overall, its debt stood at Rs 2,947 crore at the end of June 2023, with India Cements already repaying a quarter of the Rs 400 crore it owes in current maturities by March 31, 2024.

Things aren’t set to get better in a hurry, either. “With cement prices continuing to be under pressure in South India, material improvement in profitability appears unlikely in the near term. Accordingly, its net debt/EBITDA (earnings before interest, tax, depreciation and amortisation) is projected to stay elevated at >5X for FY24E,” ICICI Securities states in a note dated September 23, 2023.

In these challenging times, though, India Cements has had a friend to lean on—Indian Premier League (IPL) franchise Chennai Super Kings (CSK). CSK’s annual report for the year ended March 2023, which was published in September, revealed that India Cements MD and Vice Chairman N Srinivasan and his family had returned as promoters of the team following a seven-year hiatus. While this was quickly picked up by media houses, what went unnoticed was that CSK loaned an amount of Rs 180 crore to India Cements with effect from November 15, 2022.

This is a simple case of an inter-corporate deposit—a form of unsecured borrowing between companies—and is covered under the ambit of the Companies Act of 2013. The decision to borrow from CSK, though, highlights the precarious position India Cements finds itself in. “Sometimes, banks also require directors to give personal guarantees besides providing securities. An inter-corporate deposit is much simpler,” says an advocate who specialises in company law, who spoke on condition of anonymity.