Ultratech, JSW to now reinforce capacity plans

Upstaged by Adani, capacity expansion to be their top focus area: Analysts

Ultratech and JSW Cement, who lost out to Adani Group in the race to acquire Ambuja Cements and its subsidiary ACC from parent Holcim AG, are now likely to focus on speeding up their capacity expansion plans, say analysts tracking the market.

JSW declined to comment when contacted. A text sent to Aditya Birla Group, which owns Ultratech Cement, elicited no response.

However, Ultratech, according to analysts, plans to take its cement capacity to 137 million tonnes per annum (mtpa) by the end of the current financial year (2022-23, or FY23). The country’s largest cement manufacturer has a capacity of 120 mtpa, say sector experts.

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

“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,” says Manish Valecha, lead cement and construction analyst at Anand Rathi Securities.

The Adani-holcim deal puts the Gujarat-headquartered group in the No. 2 spot within the cement industry, after Ultratech, with a capacity of 70 mtpa.

Adani Group has indicated it would like to double its capacity in the years to come, although this may not be easy, say analysts, given the paucity of large targets in the marketplace.

In a recent analyst call, Ultratech said it was on track to complete its expansion projects, including adding around 16.5-17 mtpa of capacity in FY23, of a total expansion plan of around 19.5-20 mtpa. At a broader level, the company intends to touch 160 mtpa in terms of total installed capacity by 2029-30, say analysts.

JSW Cement, on the other hand, is not a listed player yet. Apollo Global Management and Synergy Metals Investments are existing investors in JSW Cement, say experts. They had invested ~1,500 crore of the ~3,600-crore capital expenditure planned last year by the company to increase capacity.

JSW had also lined up funds of $7 billion to acquire controlling stake in ACC and Ambuja Cements from Holcim before it was upstaged by Adani Group for $10.5 billion.