UltraTech Cement to scale up capacity, announces Rs 12,886 cr investment towards Capex

The expenditure would increase capacity by 22.6 million tonnes per annum (mtpa) through a mix of brownfield and greenfield projects. This would entail setting up integrated and grinding units as well as bulk terminals across the country, UltraTech said about its board decision, with commercial production from these units going on stream in a phased manner by financial year 2024-25 (FY25).

The announcement comes a fortnight after the Adani group upstaged UltraTech and JSW Cement to acquire Ambuja Cement and its subsidiary ACC from Switzerland’s Holcim AG for $10.5 billion.

The deal for Ambuja put Adani group at number two in the cement sector in terms of installed capacity at 70 mtpa, after UltraTech, which has 120 mtpa of installed capacity.

Analysts have said that UltraTech and JSW Cement would focus their attention on speeding up their capacity expansion plans in a bid to counter Adani.

In a recent analyst call, UltraTech had said it was on track to complete its existing expansion projects, including adding around 16.5-17 mtpa of capacity in financial year 2022-23 (FY23), of a total expansion plan of around 19.5-20 mtpa. This would take its cement capacity to around 137 mtpa by the end of FY23, sector experts said.

UltraTech’s new round of capex activity would take its total installed capacity to 159.25 mtpa, in line with its broader objective of touching 160 mtpa in the next few years, analysts said.

JSW Cement, on the other hand, intends to take its capacity to 25 mtpa by 2023-24 (FY24), from the present-day 16 mtpa, said experts.

“Both UltraTech and JSW Cement will continue to look at inorganic growth opportunities. However, there are not enough large targets to go after, following the Adani-Holcim deal. What you have are smaller players in the market. Organic growth is a more effective way of adding scale for UltraTech and JSW Cement, although both companies will keep a close watch on how competitor Adani manoeuvres the market,” said Manish Valecha, lead cement and construction analyst at Anand Rathi Securities.

Kumar Mangalam Birla, chairman of Aditya Birla Group that owns UltraTech, said the new capacity expansion plan was a significant milestone in the ongoing transformational journey of UltraTech.

“The company has more than doubled its capacity over the last five years and is committed to meeting India’s future needs for housing, roads, and other infrastructure. This investment is backed by a strong conviction on India’s growth potential as well as a deep and nuanced understanding of the market dynamics of the cement industry,” Birla said in a statement.