Driving growth through strategic acquisitions and expansion

UltraTech Cement: Beneath the gleaming facade of modern India lies a network of heroes like Ultratech Cement, working tirelessly to build a solid foundation for the country’s development. While their story may not often make headlines, their work is etched in the tall pillars of the bridges that connect communities and the infrastructure that fuels economic growth.

Every bag of cement they produce becomes a vital part of India’s symphony of progress. Ultratech’s expertise ensures that every bag of cement that leaves their factories is transformed into solid foundations for hospitals, homes and important infrastructure projects.

Schools and colleges built with cement become breeding grounds for future engineers, doctors and entrepreneurs. They provide sustainable cement solutions and maintain high quality standards, which contributes to the social and economic well-being of the country.

Their dedication ensures that India’s future is built responsibly and paves the way for a more prosperous and sustainable tomorrow. Come and let’s try to understand everything about the company.

Industry Overview

The Indian cement industry is poised for significant growth, thanks to government initiatives and a solid economic outlook. Despite global economic challenges, India is set to emerge as the fastest-growing economy. The International Monetary Fund has projected India’s GDP growth to be 5.9% and 6.3% in 2023 and 2024, respectively, providing a solid foundation for the cement industry to expand. Cement demand in India is expected to grow by 10% in fiscal 2023 on the back of growth in the housing sector.

Investments and government initiatives are also playing a key role in increasing the demand for cement. The Union Budget 2023-24 has allocated significant funds for infrastructure, housing and rural development projects. Some of the significant allocations include USD 9.6 billion to address housing shortages and USD 1.8 billion for safe housing, sanitation and clean drinking water.

Budget outlays for the National Highway Authority of India (NHAI) and the Ministry of Road Transport and Highways rose 25% and 14% from a year earlier. The cement industry, which will see its third consecutive year of growth in fiscal 2024, is expected to grow 7-9% to around 425 million tonnes.

This is expected in the affordable housing and infrastructure development segments of rural areas. Government capital expenditure such as production-linked incentive schemes and national logistics policy are also boosting production and creating a positive outlook for the industry.

Company Overview Ultratech Cement

Ultratech Cement is an Indian multinational cement company headquartered in Mumbai. It started its operations in 1983 as the cement division of Larson & Toubro and was sold under the name of L&T Cement. In 2000, as L&T decided to sell its cement business and set up a wholly owned subsidiary, it was named Ultratech Cement.

The company is the largest producer of white, grey and ready-mix concrete (RMC) in India. Over the years, the company has undergone various mergers and acquisitions to become one of the largest cement companies worldwide, excluding China.

Ultratech has manufacturing plants, grinding units and bulk packaging terminals across India and operations in Sri Lanka, Bahrain and the UAE. It is the first company in India and the second in Asia to issue a dollar-backed sustainability-linked bond.

Finances Ultratech Cement

For FY24, Ultratech Cement reported a 12.12% growth in revenue at Rs 70,906 crores as compared to Rs 63,239 crores in FY23. The growth in revenue was on account of increased spending by the government on infrastructure and rising demand in the housing sector.

In the January-March 2024 quarter, Ultratech grew 30% QoQ and 11% YoY in volume terms. The company achieved 85% capacity utilization compared to the industry average of 71%. Ultratech’s average prices grew at a CAGR of 3.5% over the last five years.

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Ultratech Cement’s Future Plans

Latest Acquisition

The Board of Directors of Ultratech Cement recently approved the purchase of 7.06 crore equity shares of India Cements Ltd (ICL). The purchase was made at Rs 267 per share, which gave it 23% of the share capital of ICL. The move would give Ultratech Cement significant influence over ICL’s operations and strategy. The investment could also help Ultratech Cement increase its market share in the southern region, as ICL has a strong presence in southern India.

Increased production capacity

Ultratech Cement plans to achieve 199.6 million tonnes of total production capacity by the end of FY2027 and in FY2025 the company expects to add 15-17 million tonnes of new capacity. Ultratech aims to reduce its operating cost by Rs 200-300 per tonne over the next three years. They wanted to achieve this by improving the blended cement conversion ratio, reducing the driving distance and increasing the use of alternative fuel. The company wants to increase Green power share (renewables and WHRS) from 24% to 60% by fiscal year 2027.

Capital Expenditure

Ultratech is planning to have a capex of Rs 9500-11000 crores per annum for the next 3 years. They are focusing on growing the ready-mix concrete business which has huge potential in this segment. The company is aiming to achieve a net cash position by the end of FY25 and plans to complete the merger with Kesoram by March 2025.

Application

Looking at Ultratech’s plans and financial performance, such as growing sales and volume growth, we can understand that they have a promising future. Ultratech’s strong presence in India and expansion of manufacturing capacity position them well to leverage the growing infrastructure needs. Their strength, sustainability and scale ensure that the company meets the growing requirements of India.

Their vision simply goes beyond scaling and ensures that they remain agile to market trends. As India continues to grow, Ultratech Cement stands tall to provide its services for continued success. What would you say about the future of Ultratech Cement? Let us know in the comments below.

Written by Pavunkumar VM

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