Cement giant UltraTech Cement Ltd on Thursday announced an increase in its grinding capacity to 22.6mtpa Capital expenditure 12,886 crore rupees. Mtpa is short for million tonnes per year. Capacity addition will be through a mix of brownfield and greenfield expansion.
The commercial production from these new capacities is expected to commence in a phased manner by FY25, the management said in a press release. In addition, UltraTech’s current expansion program is on track and is anticipated to be completed by the end of FY23, the release said. Note that after the completion of the latest round of expansion, UltraTech’s gray capacity will increase to 159.25 MTPA.
Analysts at Emkay Global Financial Services Ltd say the next phase of expansion will support volume growth and help UltraTech maintain its leadership position. “In our current forecasts, we have modeled a capacity/volume CAGR of 7%/9% over FY22-25E. Factoring- In the next phase of capacity addition by FY25, we are looking at 7% above our current capacity estimates and ~ Looking up 5% for FY26 volume forecast,” said Emkay’s report. CAGR is short for Compound Annual Growth Rate.
Nevertheless, reacting to this development, shares of the company fell 2.5% on the NSE in early trade on Friday.
“At the present time of weak demand, high fuel cost and entry of a new company in the segment, any significant capacity announcement may be viewed negatively by the market,” the Emkay report said. Recently, the Adani Group entered into an agreement to acquire Holcim’s business in India, which includes its 63.11% stake in Ambuja Cement Limited, which owns a 50.05% interest in ACC Limited, as well as its 4.48 percent stake in ACC. % direct share.
Secondly, analysts at Motilal Oswal Financial Services Ltd now expect UltraTech to turn net cash positive in FY26 before FY24, against the backdrop of fresh capex. The domestic brokerage house is positive about the long-term prospects of the cement sector, but expects cement stocks to remain under pressure in the near future.