UltraTech Cement's ₹5,477 crore expansion plan is a sign that Birla is betting on a faster economic recovery
- UltraTech Cement has announced a ₹5,477 crore expansion plan that will add 12.8 million tonnes to its annual capacity.
- The move comes after Aditya Birla Group chairman and billionaire Kumar Mangalam Birla expressed confidence in the cement sector during his only media interaction of 2020.
- UltraTech Cement is already the largest cement company in India and the third-largest globally. Its expansion plans will further increase its annual capacity by 10.4% to hit 136.25 million tonnes per annum.
Now, it’s doubling down on this with a greenfield investment of ₹5,477 core to increase its annual production of cement by 12.8 million tonnes. That's 10.4% more cement than it currently produces.
The massive investment plan is in sync with the confidence Aditya Birla Group Chairman Kumar Mangalam Birla displayed in a recent interview — his only media interaction this year— with Business Insider.
“There was a big question around what would happen to infrastructure spending. If I just see aluminium and cement businesses, they’ve both come back to pre-COVID levels very quickly."
Edelweiss Research pointed out in a report dated December 2 that while demand for cement has certainly returned, it’s not quite at pre-COVID levels yet. Meanwhile, the stock of Ultratech has rallied over 55% in the last seven months.
Birla is doubling down on cement while economic indicators are sluggish
UltraTech Cement already commands 25% of the industry capacity. Once this latest round of expansion is complete, overall capacity of the company will be at 136.25 million tonnes per annum — continuing to remain the biggest cement producer in India and the third-largest globally.
This expansion includes the previously approved cement plant at Pali in Rajasthan with the capacity to produce 6.1 million tonnes per annum. The rest of the 6.7 million tonnes of annual production capacity comprises additions to plants in Uttar Pradesh, Odisha, Bihar and West Bengal.
|East India||10.2 million tonnes|
|Central India||5.1 million tonnes|
|North India||2.5 million tonnes|
|West India||1.8 million tonnes|
“We believe improving industry fundamentals and capacity addition primarily in demand accretive East, Central and North India augur well for the company to achieve sustainable growth,” said Elara Securities in its report dated December 3.
“In terms of more — we’ve always been on the lookout for value-creating investments. Whether they be greenfield or brownfield or inorganic. We’ve made more than 40 acquisitions over the last two and a half decades. Most of them have worked very well and served the purpose for which the acquisition was made,” said Birla.
“So I think it’s about looking out for opportunities. First of all, they must fill a strategic gap. And, they must be value-creating,” he added.
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