UltraTech raises $500 mn via sustainability-linked loan; stock gains 1%

UltraTech Cement has raised $500 million through a sustainability-linked loan, according to an exchange filing on Monday. This financing is the company’s second sustainability-linked initiative, following the $400 million bond issue in 2021.

“This financing is aligned with UltraTech's recently published Sustainability-Linked Financing Framework which covers the company’s future sustainability-linked bond and loan issuances,” the press release said.

Following the announcement, India's largest cement producer’s shares rose by 1% to ₹11,450 from the previous close of ₹11,337.10 on the NSE today. After opening at ₹11,389.10, the shares are currently trading at ₹11,357.35. The company's total market capitalisation stands at ₹3.27 lakh crore.

The six banks involved in the lending included SMBC, SBI, BNP Paribas, DBS, MUFG, and Mizuho. Sumitomo Mitsui Banking Corporation (SMBC) served as the sole Sustainability Coordinator and advisor for this transaction.

The loan’s Sustainability Performance Targets (SPTs) reflect UltraTech's core sustainability objectives, including a 27% reduction in Scope 1 emissions per tonne of cement by 2032 from an FY17 baseline, and increasing the share of green energy derived from waste heat recovery systems, solar, and wind power to 85% by FY30 and 100% by FY50.

According to its FY24 sustainability report, the company's combined emissions intensity for Scope 1 and Scope 2 remained steady at 618.17 kg CO2e per tonne. Scope 1 emissions are direct greenhouse gas emissions from owned or controlled sources, such as fuel combustion in company vehicles or facilities. Scope 2 emissions are indirect emissions from the consumption of purchased electricity, steam, heating, and cooling.

Clinker, a key component of cement production, accounts for nearly 90% of CO2 emissions from cement production (including Scope 1 and Scope 2). The process emits about 0.9 tonnes of CO2 per ton of cement, making it the second-largest global source of CO2 emissions. In cement production, approximately 50% of greenhouse gas emissions stem from material consumption, 40% from fuel combustion and the remaining 10% from electricity use and transportation.

The Aditya Birla Group-owned Ultratech Cement recently approved the acquisition of a 32.72% stake in India Cements, increasing its total shareholding to 55% and making it the majority shareholder. The company, which has a consolidated production capacity of 154.86 million tonnes per annum, reported a consolidated net profit of ₹1,697 crore for the quarter ending June 30, 2024. This represents a modest 0.50% increase from the ₹1,688 crore reported in the same quarter of the previous year.