UltraTech plans an ₹12,866 cr investment to boost capacity
MUMBAI: UltraTech Cement Ltd, the country’s largest maker of the building material, said it would spend ₹12,866 crore on adding 22.6 million tonnes per annum (mtpa) capacity, just weeks after the Aditya Birla group flagship lost the race to acquire Holcim Ltd’s India cement assets to billionaire Gautam Adani.
The acquisition of Ambuja Cements Ltd and its unit ACC Ltd, with a cement manufacturing capacity of almost 70 mtpa, is set to make the Adani Group the second-biggest cement maker in the country and the chief rival of UltraTech.
The race to expand capacity comes as the government plans to spend a record ₹7.50 lakh crore this year to build roads and ports to boost growth, increasing demand for building materials such as cement. In addition, the revival of capital spending by the private sector, including construction firms, is also expected to boost cement demand.
On Thursday, the board of UltraTech approved the plan to increase capacity through a mix of brownfield and greenfield expansion. The additional capacity will be created across the country and would include setting up integrated and grinding units as well as bulk terminals, the company said in a statement.
“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,” Kumar Mangalam Birla, chairman of Aditya Birla Group, said on Thursday.
“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. Given the size of the investment outlay, I am confident that this new capacity creation will have a multiplier effect, leading to jobs and growth across regions in India.”
The national elections in 2024 are also expected to boost demand for cement as the central and state governments announce new projects and complete planned ones to lure voters.
“With the central elections in 2024, we expect demand to pick up meaningfully next year with the government’s focus on infrastructure and rural growth. We would note that in the previous instance (FY19), demand grew by low double digits,” an April report by brokerage CLSA said.
Commercial production from UltraTech’s new capacities is expected to start in a phased manner by FY25. Its current expansion programme is also on track and is estimated to be completed by the end of FY23, the company added.
Upon completion of the latest round of expansion, the company’s capacity will rise to 159.25 mtpa, reinforcing its position as the third-largest cement company in the world, outside of China. Its current cement capacity stands at 119.95 mtpa.