UltraTech makes more cement than all of US; to surpass Europe by 2027

With the completion of ongoing expansion projects across India and the closure of acquisitions like Kesoram Cement (10.75 million tonne a year) and India Cements (14.45 MTPA), the production capacity of UltraTech Cement Ltd will surpass 200 MTPA by FY27, says KC Jhanwar, managing director, UltraTech. “This puts us on a strong growth trajectory ahead,” he tells Fortune India.

UltraTech’s current cement capacity of 154.86 MTPA is more than the cement capacity of the US (125 MTPA) and constitutes 80% of the entire capacity of Europe (190 MTPA), which it is set to surpass by 2027 at 200 MTPA.

In FY24, UltraTech commissioned 13.3 MTPA of cement capacity. “Building on this momentum, we have added 7.6 MTPA in this financial year so far through capacity expansion projects alone,” he says. This capacity addition has been achieved at low capital expenditure, and the deployment of in-house technology has enabled low operating expenditure, he adds.

According to Jhanwar, the capacity addition and the low capex and opex will provide a strong competitive advantage. “UltraTech has a clear strategy driven by strong organic growth coupled with strategic acquisitions. This growth strategy is underscored by a holistic cost management approach, which is a critical value driver for our business,” he says.

The rationale for acquisitions is driven not just for capacity augmentation but, more importantly, to ensure it is value accretive, he added.

He believes that India will become the growth engine for the world in the coming years. “The demand for housing and commercial spaces is expected to increase dramatically on the back of high GDP growth coupled with the increasing aspirations of young Indians,” he says.

Brokerage firm Citi said that the management of Ultratech expects 8% demand growth in the country in FY25. It includes an implied growth of more than 12% in the second half. The industry is witnessing decrease in costs and rise in prices.

To meet the increased demand, the cement industry plans to add 35-40 MTPA of capacity in this financial year, with 60-65% concentrated in the eastern and southern regions. The spike in demand will also enhance the capacity utilisation of the industry to 72% in FY25, which was around 68% in FY23.

UltraTech raised $500 million through a sustainability-linked loan with contributions from six banks about a month back. The fundraise marks the cement maker's second sustainability-linked financing, after it raised $400 million in 2021. Sustainability-linked finance is a method through which borrowers meet environmental, social, and governance targets while raising funds. UltraTech said its sustainability targets include reducing emissions and increasing the share of green energy.

“The focus on increasing the share of green cement products in the portfolio, increasing share of green energy replacing fossil fuels, and continuously increasing the circularity of materials through enhanced alternative fuels and raw materials (AFR) usage not only reduces the carbon footprint but also helps reduce costs and improve profitability,” says Jhanwar.