Sarbottam Cement Ltd (NEPSE: SARBTM) — Investment Report

Executive Summary

Sarbottam Cement Ltd (NEPSE: SARBTM) is Nepal's first cement company to have listed via a book-building initial public offering (March 2024) and operates an integrated plant using Vertical Roller Mill (VRM) technology at Sunwal, Nawalparasi, as the flagship company of the Saurabh Group (Neupane family). For fiscal year 2082/83 (ended mid-July 2026, figures unaudited pending the company's audited annual report), SARBTM reported standalone revenue of NPR 10,258.5 million (+7.6% year-on-year) and net profit of NPR 1,107.4 million (+7.7%) (Source: SARBTM Q4 FY2082/83 unaudited quarterly bulletin — Primary, unaudited). Decomposing that profit growth, however, shows it was driven almost entirely by a sharp fall in Nepal's lending rates — SARBTM's own effective borrowing cost fell from 8.61% to 5.90% during the year — rather than by the underlying cement business, which, on a same-rate basis, would have posted a small decline in profit. Separately, the company's gross margin fell in every one of the fiscal year's four quarters (from 31.0% to 17.4%), with the weakest margin recorded in the peak construction season. This profile works through both the genuine structural advantages SARBTM has (an integrated, captive-clinker plant in a market where several import-dependent competitors have struggled) and several unresolved governance and disclosure questions.

Business Overview

Sarbottam Cement Ltd was incorporated in October 2010 and began commercial production in February 2014, converting to a public limited company in 2019 before its March 2024 listing (Source: SARBTM Annual Report FY2081/82 — Primary). Its integrated plant at Sunwal, Nawalparasi has a stated installed capacity of approximately 3,000 tonnes per day of both cement and clinker (roughly 1 million tonnes per annum each), unchanged across the three audited annual reports on record. The company states it owns limestone concessions covering more than 20 square kilometers in Palpa and Chitwan, manufactures its own clinker, and was the first Nepali cement producer to adopt Vertical Roller Mill technology; it also operates a 5 MW captive thermal power plant and distributes through more than 1,500 dealers across roughly 56 districts, with cement exports to India since FY2079/80 under BIS certification (Source: SARBTM Annual Report FY2081/82, Directors' Report — Primary, company self-reported).

Group structure. SARBTM consolidates several subsidiaries acquired in FY2081/82: Shubha Shree Jagdamba Cement Mills (99.5% owned), Jagdamba Cement Industries (100%), Sarbottam Cement East (100%), and smaller mineral and holding entities. On a consolidated group basis, FY2081/82 (the last year for which group figures exist) revenue was NPR 14,849.9 million and net profit NPR 1,313.9 million, or NPR 27.27 per share (Source: SARBTM Annual Report FY2081/82 — Primary). A further acquisition, Manasa Cement Industries in Jhapa, has been reported in press coverage but does not appear in any company filing reviewed for this profile.

Ownership and float. Promoter holdings stand at approximately 87.1% of shares outstanding, leaving a public float of roughly 10.9% (approximately 5.4 million of 52.2 million shares) (Source: NEPSE trading data, cross-checked against secondary market commentary — Secondary; the promoter/public split is not disclosed in SARBTM's own annual reports). This is a notably more concentrated ownership structure than its principal listed peer, Shivam Cements (SHIVM), whose promoter lock-in cleared in March 2022 and which trades with a substantially larger public float.

Financial Performance

All figures NPR millions, standalone, unless noted. FY2082/83 figures are from the company's unaudited fourth-quarter bulletin; the audited annual report for this year had not been published as of this profile's reference date.

Source: SARBTM audited annual reports FY2079/80–FY2081/82; FY2082/83 unaudited Q4 bulletin — Primary. FY2077/78 and FY2078/79 figures (not shown here) come from the company's own Directors' Report financial-highlights chart rather than an audited statement, and are lower-confidence.

Earnings per share have declined over the longer term even as the balance sheet has grown. Basic EPS fell from NPR 45.58 in FY2077/78 to NPR 21.20 in FY2082/83 — a compound decline of roughly 14% per year over five years — despite the company's March 2024 IPO raising approximately NPR 2,261.6 million in fresh equity. Net asset value per share rose from NPR 160.13 to NPR 199.82 over the same period, a compound growth rate of roughly 4.5% per year, but that growth was driven substantially by the IPO proceeds rather than by retained profit. FY2082/83 was the first year in the five-year record in which both EPS and NAVPS declined year-on-year (EPS from NPR 21.35 to NPR 21.20; NAVPS from NPR 202.55 to NPR 199.82), reflecting a 5% bonus share issuance and a NPR 746.3 million cash dividend that removed per-share value faster than the business added it that year.

The reported profit growth decomposes almost entirely to a financing-cost tailwind. Nepal's commercial-bank weighted-average lending rate fell from 7.85% to 6.55% during FY2082/83, and SARBTM's own effective borrowing cost (finance cost divided by average borrowings) fell from 8.61% to 5.90% — a decline of approximately 272 basis points (Source: SARBTM financial statements; Nepal Rastra Bank, Current Macroeconomic Situation report, August 2026 — Primary/Derived). Had FY2082/83 carried the prior year's effective borrowing cost, finance cost on average borrowings of NPR 4,110.9 million would have been approximately NPR 354.0 million rather than the actual NPR 242.4 million — a difference of roughly NPR 111.6 million before tax, or roughly NPR 92.0 million after tax. On that basis, profit before the rate tailwind would have been approximately NPR 1,015.4 million — about 1.2% below FY2081/82's NPR 1,028.2 million, rather than the 7.7% increase actually reported.

Quarterly Snapshot — FY2082/83

Standalone, discrete quarters derived from cumulative year-to-date filings (Source: SARBTM Q1–Q4 FY2082/83 unaudited quarterly bulletins — Primary, unaudited, Derived).

Gross margin fell in every quarter of the fiscal year, and the weakest margin coincided with the highest revenue. The full-year gross margin of 22.65% is the average of a first quarter at 31.01% decaying through the year to a fourth-quarter figure of 17.36% — and that fourth quarter (mid-April to mid-July 2026, Nepal's peak dry-season construction period, which would typically be the strongest quarter) delivered both the lowest margin and the lowest discrete quarterly profit of the year, on the highest revenue. This pattern is consistent with the company increasing sales volume at a falling realized price during its peak season, rather than exercising pricing power.

Working capital metrics improved materially over the period on record. The cash conversion cycle (days inventory plus days receivable, less days payable) fell from 270.2 days in FY2079/80 to 166.4 days by FY2082/83 — still long by general industry standards, but a clear multi-year improvement (Source: SARBTM financial statements, Derived). Trade receivables fell 19.0% even as revenue rose, though because FY2082/83 related-party transaction amounts were not available in machine-readable form for this profile, it cannot be determined whether this reflects genuine third-party collection or a reduction in intercompany balances with SARBTM's own subsidiaries.

Market Position & Competitive Landscape

A natural experiment on reconstruction-driven cement demand already ran during FY2082/83, and it did not show a demand boom. In September 2025, protests in Nepal caused significant destruction to buildings, including government structures, and the government established a national Reconstruction Fund shortly afterward (Source: Kathmandu Post, October and September 2025 — Secondary). That event, plus the fund, fell within SARBTM's FY2082/83 fiscal year. Comparing the four Nepali cement companies listed on NEPSE for the same fiscal year: SARBTM's standalone revenue grew 7.6%; Shivam Cements' revenue fell 8.2% (nine-month comparison, the latest available); Ghorahi Cement's revenue fell 6.4% (reporting a net loss for the year); and Pashupati Cement's revenue grew 15.9% but its gross margin fell 829 basis points (Source: each company's audited or unaudited financial filings — Primary). Three of the four producers grew revenue at or below Nepal's prevailing inflation rate of approximately 5.1%, and two outright shrank — evidence against an immediate, broad-based cement demand lift from a destruction-and-reconstruction event, at least within the first ten months of that cycle.

A second, larger flood event occurred after SARBTM's fiscal year had already closed. The Bhotekoshi/Trishuli river flooding of August 26, 2026 — the basis of more recent reconstruction-driven investment interest in Nepali cement companies — fell approximately six weeks after SARBTM's FY2082/83 fiscal year ended (Ashadh 32, 2083 / July 16, 2026). No revenue or profit impact from this flood can appear in any of SARBTM's filed financial statements as of this profile's reference date; the earliest filing that could reflect it is the Q1 FY2083/84 report, due around mid-November 2026. Nepal's government Rapid Damage and Needs Assessment estimated total reconstruction needs of approximately NPR 723.3 billion, with NPR 714.6 billion attributed to long-term reconstruction (Source: cited via Wikipedia's summary of the official assessment; ABC News, September 2026 — Secondary), a potentially significant demand pool for cement if it converts into realized construction spending, though the September 2025 precedent above suggests such conversion, if it occurs, may take considerable time to show up in quarterly cement-company revenue.

The clearest, most evidence-backed competitive finding in this update is that vertical integration (owning captive clinker production) appears to be a genuine cost advantage during the current cycle. All three Nepali cement producers that manufacture their own clinker — SARBTM, Shivam Cements, and Ghorahi Cement — expanded gross margin year-on-year (+158, +448, and +396 basis points respectively), while Pashupati Cement, whose cost structure is more exposed to imported, India-priced inputs, saw its gross margin contract by 829 basis points, citing currency and import-price fluctuations in its own filings (Source: each company's financial filings — Primary). Trade press has reported that a number of smaller, non-integrated cement plants in Nepal's Koshi province closed in 2025 due to clinker shortages (Source: secondary trade press, cited via industry commentary — Secondary, not independently verified). SARBTM's own margin gain (+158 basis points) was nonetheless the smallest of the three integrated producers, and the company's power-and-fuel cost ratio (35.7% of revenue in the last audited year) remains well above Shivam Cements' 26.1% — meaning SARBTM's specific VRM technology claim of superior energy efficiency remains difficult to verify, particularly because none of the four listed Nepali cement companies discloses production tonnage, making a true cost-per-tonne comparison impossible across the industry.

Nepal's cement sector overall continues to operate at low utilization. Industry estimates (which vary somewhat between sources) put national installed cement capacity at approximately 22 million tonnes against demand of roughly 8 million tonnes, implying utilization in the 35–50% range; one state-owned producer, Udayapur Cement, closed in June 2025 (Source: various trade press — Secondary/Tertiary, figures not fully consistent across sources).

Regulatory & Macro Context

An unresolved electricity-tariff dispute with Nepal Electricity Authority (NEA) remains a material contingent liability. SARBTM's disclosed contingent liability for this dispute — covering alleged overcharging during a period when the company used dedicated-feeder power at non-dedicated tariffs — rose from NPR 675.8 million to NPR 774.2 million to NPR 862.7 million across FY2079/80–FY2081/82, equivalent to roughly 8.3% of FY2082/83 equity, and remains unprovided for on the balance sheet (Source: SARBTM Annual Report FY2081/82, contingent liabilities note — Primary). SARBTM has deposited only approximately NPR 11.3 million against this liability. The matter is before Nepal's Supreme Court; a comparable, unresolved NEA contingent liability (NPR 1,276.1 million) exists at peer Shivam Cements, indicating this is a sector-wide rather than company-specific risk. SARBTM's own FY2082/83 unaudited quarterly bulletin, in its abbreviated format, does not carry a contingent-liability note, so the current balance of this dispute is not disclosed as of this profile's reference date.

Nepal's falling interest-rate environment has been the principal driver of SARBTM's recent earnings, as discussed above, and the company's roughly NPR 4.4 billion borrowing stack means any future rise in Nepal's lending rates back toward historical levels would directly reverse this benefit.

Governance & Capital Allocation

A chief executive transition occurred without disclosure in any company filing. SARBTM's FY2081/82 annual report (published December 2025) was signed by CEO Santosh K.C., a chartered accountant. On February 19, 2026, the company advertised publicly for a new CEO, seeking candidates with "at least 8 years of hands-on experience with cement manufacturing processes" (Source: SARBTM recruitment advertisement, company website, accessed 2026-10-03 — Primary). By September 9, 2026, press coverage identified Diwas Neupane — a member of the controlling Neupane family who had previously served as a promoter director — as the company's CEO (Source: ICT Frame, September 2026 — Secondary). No company filing reviewed for this profile discloses either the departure of the prior CEO or the appointment of the new one.

Board structure. The board is led by an Executive Chairman, Bishnu Prasad Neupane, with five promoter directors, one public director, and one independent director (Source: SARBTM Annual Report FY2081/82 — Primary). The company's external auditor, Priyank & Associates, has audited both machine-readable years on record; the auditor's opinion text is embedded as a scanned image in both annual reports, so the opinion type (unqualified, qualified, or otherwise) could not be independently confirmed for this profile.

A discrepancy exists between SARBTM's audited FY2081/82 dividend note and its own AGM notice for the same board meeting. The audited annual report's Note 40 states the board proposed "15% stock dividend and 5% (including tax)" on the year's paid-up capital. The company's own 7th Annual General Meeting notice, however, cites the same board meeting and states the opposite allocation: a 15% cash dividend (NPR 746,325,000) and a 5% bonus share issuance (NPR 248,775,000) (Source: SARBTM 7th AGM Notice, company website — Primary). The balance sheet corroborates the AGM notice version: paid-up capital rose by exactly 5% between quarters, and total equity fell by roughly NPR 484.7 million in a quarter when the company was also accruing profit — consistent with a large cash payout rather than a stock dividend. This inversion between the audited annual report and the company's own AGM notice is a disclosure-quality issue that has not been explained in any subsequent filing.

Related-party transactions with SARBTM's wholly or near-wholly owned subsidiaries are substantial. In FY2081/82, standalone sales to subsidiaries were NPR 4,066.8 million (42.7% of standalone revenue), and the trade receivable from subsidiaries stood at NPR 1,856.8 million at year-end (Source: SARBTM Annual Report FY2081/82, related-party note — Primary). Because the subsidiaries are 99.5–100% owned and fully consolidated, intercompany margin remains within the economic entity SARBTM's own minority shareholders own; this is a meaningful mitigating factor relative to related-party structures where a promoter extracts value to an entity minority shareholders do not own. Separately, promoter director Tika Ram Neupane chaired both companies on either side of SARBTM's acquisition of Jagdamba Cement entities, without a disclosed independent fairness opinion on the acquisition pricing. FY2082/83 related-party transaction amounts were presented only as non-machine-readable numerals in the company's unaudited quarterly bulletin and could not be verified for this profile.

Two balance-sheet items remain unexplained. A NPR 285.0 million "Directors Payable" liability appeared on the balance sheet at the end of FY2079/80 and was cleared to zero the following year, with no explanation in any subsequent filing. Separately, an "Other Current Liabilities" balance fell from NPR 978.9 million to NPR 93.4 million between FY2081/82 and FY2082/83 — a decline of roughly NPR 885.5 million, or approximately 8.5% of equity — with no accompanying note in the abbreviated quarterly filing format.

Dividend record. SARBTM paid a 15% cash dividend from FY2079/80 profits and a combination of 7% stock plus 3% cash from FY2080/81 profits; from FY2081/82 profits, as discussed above, it paid 15% cash plus a 5% bonus share issuance. Cumulative standalone net profit across FY2079/80–FY2082/83 was approximately NPR 2,498.9 million, against cumulative cash dividends paid of approximately NPR 2,048.3 million — leaving roughly NPR 450.6 million retained, a small amount relative to the approximately NPR 2,261.6 million raised in the March 2024 IPO that has substantially funded the company's balance sheet growth.

What Is Not Disclosed

1. Production tonnage, capacity utilization, and realized price per tonne are not disclosed by SARBTM or by any of the other three listed Nepali cement companies, making genuine cost-per-tonne or market-share comparisons impossible across the industry.
2. FY2082/83 related-party transaction amounts were presented only in non-machine-readable form in the unaudited quarterly bulletin, preventing calculation of SARBTM's external (non-intercompany) revenue growth for the most recent year — a figure that matters because 42.7% of the prior year's standalone revenue was intercompany.
3. A full statement of cash flows for FY2082/83 was not included in the company's abbreviated quarterly filing format, preventing an independent profit-versus-cash-flow quality check for the most recent year.
4. The driver of the FY2082/83 gross margin change (power and fuel costs, raw material costs, or product mix) cannot be determined, since the detailed production-expense note was not available for this year.
5. The current balance of the NEA electricity contingent liability is not disclosed in the FY2082/83 unaudited filing.
6. The auditor's opinion type (unqualified, qualified, or otherwise) could not be confirmed for any year reviewed, as the opinion pages are embedded as scanned images.
7. The nature of the NPR 285.0 million "Directors Payable" that appeared and later cleared on the balance sheet, and the NPR 885.5 million decline in "Other Current Liabilities," remain unexplained.
8. The reported Manasa Cement Industries acquisition — its consideration, financing, and capacity — does not appear in any company filing reviewed for this profile.
9. The company's own stated energy-efficiency claim for its VRM technology changed between consecutive annual reports (from "up to 50%" energy savings in one annual report to "up to 20%" in the next), with no explanation for the revision.

Analytical Perspectives

The case for the business. SARBTM owns a genuinely integrated plant — captive limestone, captive clinker, and VRM grinding technology — and the current operating environment provides the first clear, measurable evidence that this integration carries real economic value: all three vertically integrated Nepali cement producers expanded gross margin in the latest fiscal year, while the one import-exposed competitor did not. Working capital management has also genuinely improved over the period on record, with the cash conversion cycle falling from 270 to 166 days. SARBTM's geographic footprint, extending into Nepal's eastern provinces through its subsidiary acquisitions, could position it to serve demand associated with the August 2026 flood-affected region, though this has not yet shown up in any filed financial data.

The case for caution. Nearly all of the company's recent reported profit growth traces to a financing-cost tailwind from Nepal's falling interest rates, rather than to the cement business itself; that tailwind is largely spent, since Nepal's lending rates are near multi-year lows. Gross margin deteriorated through every quarter of the most recent fiscal year, with the weakest results recorded in the typically strongest season. The September 2025 destruction-and-reconstruction cycle, which ran entirely within the most recent fiscal year, did not produce a broad-based demand lift across Nepal's listed cement producers, which is a relevant data point — though not a conclusive one — for assessing how quickly the August 2026 flood's reconstruction needs might convert into cement demand. Finally, a series of governance and disclosure issues — an unfiled CEO transition, a dividend note that contradicts the company's own AGM notice, unexplained balance-sheet movements, and an unreadable audit opinion across all years on record — mean that an outside investor must rely more heavily on management's assertions, without independent verification, than is typical for a company of this size.

Valuation Context

At the NEPSE price of NPR 805.00 (reference date October 2, 2026) and 52,242,750 shares outstanding, SARBTM's market capitalization was approximately NPR 42.1 billion. Trailing P/E on the unaudited FY2082/83 standalone EPS of NPR 21.20 was approximately 38×; price-to-book was approximately 4.0× on FY2082/83 NAVPS of NPR 199.82.

Because approximately 87.1% of SARBTM's shares are held by promoters and the public float is concentrated in roughly 5.4 million shares, the company's market price is discovered by a relatively small pool of freely tradable stock relative to its total market capitalization — a structural feature that can support a persistent premium or discount to a value based purely on earnings, independent of the underlying cement business's performance. Separately, reverse-engineering the current price against the company's delivered return on equity and growth history implies the market is pricing in a sustained growth rate in owner earnings well above both SARBTM's recent per-share earnings trend (which has declined over the past five years) and the broader cement sector's demonstrated revenue growth in the most recent fiscal year (at or below inflation for three of four listed producers). Readers should weigh the gap between SARBTM's trailing multiple and its delivered per-share earnings history carefully, particularly given the unresolved questions about the sustainability of the recent financing-cost tailwind and the unaudited status of the most recent fiscal year's results.

What We're Watching

1. The Q1 FY2083/84 quarterly filing (due around mid-November 2026) — the first filing period in which the August 2026 Bhotekoshi/Trishuli flood's reconstruction demand could plausibly appear in SARBTM's reported revenue and margins.
2. The promoter share lock-in expiry (reported to be around March 11, 2027) and the earlier QII share-allotment unlock (reported around September 22, 2026). Given that the current public float is a small fraction of total shares outstanding, any promoter share sales following these unlock dates could be a significant supply event relative to trading volumes observed to date.
3. Resolution of the NEA electricity tariff dispute and publication of the audited FY2082/83 annual report, which would clarify the current contingent liability balance, confirm or revise the unaudited profit figures discussed in this profile, and potentially shed light on the unexplained balance-sheet items and the CEO transition.

References

1. Sarbottam Cement Ltd, Audited Annual Reports FY2079/80 through FY2081/82 — accessible via SEBON/company website. Primary.
2. Sarbottam Cement Ltd, Q1–Q4 FY2082/83 unaudited quarterly bulletins (Schedule 14 format) — accessible via SEBON/company website. Primary, unaudited.
3. Sarbottam Cement Ltd, 7th Annual General Meeting Notice, company investor-relations page. Primary.
4. Sarbottam Cement Ltd, CEO recruitment advertisement, February 19, 2026, company website. Primary.
5. Shivam Cements Limited, Ghorahi Cement Industries Limited, and Pashupati Cement Industries Limited — audited annual reports and quarterly filings, used for peer comparison, accessible via SEBON/company website. Primary.
6. Nepal Rastra Bank, "Current Macroeconomic and Financial Situation of Nepal," based on annual data for FY2025/26, published August 26, 2026. Primary. nrb.org.np.
7. Kathmandu Post, "A third of buildings torched in Gen Z protests fully destroyed," October 9, 2025; "Nepal rolls out relief, austerity plan after protest fallout," September 25, 2025; "Two companies pay dues in tranches to NEA as top court invalidates inquiry committee," March 24, 2025. Secondary.
8. Fiscal Nepal, "Tariff dispute between industries and NEA takes new turn as Sarbottam Cement begins dues settlement," October 28, 2024. Secondary.
9. Wikipedia, "2026 Nepal floods" (citing Nepal's official Rapid Damage and Needs Assessment); ABC News, "Nepal estimates reconstruction after deadly floods to cost nearly $7 billion," September 12, 2026. Secondary.
10. New Business Age, "Sarbottam Cement Acquires Shubha Shree Jagdamba Cement Mills and Jagdamba Cement." Secondary.
11. ICT Frame, "Sarbottam, Jagdamba Cement Contribution of Rs 11.11 Million," September 9, 2026. Secondary.
12. NEPSE market data — SARBTM share price, 52-week range, and ownership structure, accessed October 2026. Secondary.

Last updated: October 3, 2026.