Analyst Concall
UltraTech sees FY26 growth over 10% vs 6-7% industry growth
This story was originally published at 20:38 IST on 23 January 2025
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--UltraTech: Seen price movement in central, western region in Jan
--CONTEXT: UltraTech Cement mgmt comments in post-earnings analyst call
--UltraTech: Invest in Star Cement will help understand northeast mkt better
--UltraTech: Plan to complete consolidation of Kesoram Cement by FY25 end
--UltraTech: Plan to have 185 mln tn capacity by FY25 end
--UltraTech: Cement demand recovered in Dec after being down in Oct, Nov
--UltraTech: See govt capex improving from Jan, pushing up cement demand
--UltraTech: Plan to have 511 MW of waste heat recovery system by FY27
--UltraTech: Petcoke accounted for 58% of Oct-Dec fuel costs
--UltraTech: Expect cement industry to grow by 5% in Jan-Mar
--UltraTech: India Cements capacity utilisation at 57%, expect it to go up
--UltraTech: Kesoram Ind capacity utilisation at 70%
--UltraTech: Opportunity to lower production cost at Kesoram Cement
--UltraTech: Need to invest INR 4 bln-INR 5 bln in Kesoram going ahead
--UltraTech: Expect total capacity utilisation at 80-85% in FY26
--UltraTech: Cost of open offer for India Cements INR 31.42 billion
--UltraTech: India Cements net debt at INR 8.77 billion
--UltraTech: December exit prices were up 1% over Oct-Dec avg cement price
--UltraTech: Tamil Nadu India Cements plants have 25 years of visible life
--UltraTech: Seeing operating cost falling for India Cements
--UltraTech: India Cements prices lower by INR 20-INR 25 than UltraTech
--UltraTech: Prices in south will rise once demand improves
--UltraTech: See capex for FY26 at INR 90 bln, FY27 at INR 60 bln-INR 70 bln
--UltraTech: Jan cement prices up 1.5%; may rise further in March quarter
--UltraTech: India Cements will not partner IPL team CSK going ahead
--UltraTech: Aim for 30% mkt shr in installed capacity in South going ahead
By Aman Aryan and Avishek Rakshit
MUMBAI – UltraTech Cement Ltd. is looking to beat industry growth of 6-7% in 2025-26 (Apr-Mar) yet again by targeting growth of over 10%, Chief Financial Officer Atul Daga said in a post-earnings conference call Thursday. The projected growth will come from capacity additions and ramp up of existing operations including the acquired companies in the current financial year. The company will enter the next financial year with a capacity of nearly 185 million tonnes per annum, which includes the acquired capacity of Kesoram Industries Ltd. and India Cements Ltd., Daga said.
The company expects the cement industry to grow 5% in the March quarter. The industry will benefit from the pickup in demand seen across all sectors, Daga said. Demand was slow in October and November, but picked up in December, he said, adding that it is expected to increase further. The company is in line to add 10 million-15 million tonnes per annum of organic capacity in 2026, Daga said. In FY26, UltraTech plans capital expenditure of INR 90 billion, but the capital outlay for FY27 will be marginally lower at INR 60 billion-INR 70 billion.
Addressing analysts, Daga said there is scope to increase the capacity utilisation of India Cements, which was around 57% in the December quarter. UtltraTech increased its stake in India Cements to 55.49% in December and gained a controlling interest in the company. The company will take at least 12 months to improve the performance of India Cements to bring it up to a reasonable level, Daga said.
As part of the plan to improve the performance of India Cements and Kesoram Industries, UltraTech aims to increase the capacity of its waste heat recovery systems to 511 megawatts by FY27, which includes the additional expansion planned at the two entities. Of the 511 megawatts, 450 megawatts is for UltraTech, Daga said.
While one leg of improvement in India Cements would be visible towards the end of 2025, further improvement will be there after the efficiency improvement-based capital expenditure programme is completed. UltraTech would not be the brand partner of the Indian Premier League team, Chennai Super Kings, Daga said. Pre-acquisition, India Cements was the brand partner and the principal sponsor of the fantasy league team.
Prices of India Cements are lower than that of UltraTech by INR 20-INR 25 per bag, Daga said. Overall, the company's consolidated net debt is seen at INR 161.60 billion at the end of the open offer for India Cements, Daga said. This includes INR 8.77 billion debt of India Cements and the cost of the open offer, which is seen at INR 31.42 billion, Daga said.
The company retains its earlier proposal to spend INR 4 billion-INR 5 billion on the cement facilities of Kesoram Industries. In November, the company received approval from the National Company Law Tribunal to acquire the cement business of Kesoram Industries. UltraTech plans to complete this consolidation by the end of the current financial year.
The capacity utilisation of the cement business of Kesoram Industries is at 70%, Daga said. UltraTech sees scope to cut down the production cost of Kesoram Cement and India Cements. Talking about life of the plant, Daga said the Tamil Nadu facility of India Cements has nearly 25 years of visible life.
With its plan to increase its capacity to 60 million tonnes per annum from 20 million tonnes per annum in south, the cement-maker is looking to up its market share on the basis of capacity to 30% in the southern region. Talking about price, Daga said prices, which remained under pressure in the south, will likely rise once demand picks up in the region.
The December-exit price for cement was 1% above the average price in the quarter and the prices in January are nearly 1.5% higher, he said, adding it is expected to rise further in the March quarter. So far in January, there has been some price improvement in the central and western region, Daga said. The company expects improvement in government's capital expenditure from January, thus pushing up demand for cement.
UltraTech expects to increase its capacity utilisation to 80-85% in FY26. For the December quarter, UltraTech's average fuel cost was INR 1.76 per kilocalorie, down from INR 1.84 per kcal in the previous quarter. Petroleum coke accounted for 58% of the December quarter fuel costs for the company, Daga said.
UltraTech has invested in Star Cement Ltd. to understand the north-east market better, Daga said. The company had earlier incorporated Letein Valley Cement Ltd. as its wholly-owned subsidiary to explore opportunities in the north-east market. "We haven't been able to identify a mine land (in the north-east)," Daga said.
On Thursday, shares of the company ended at INR 11,420.90 on the National Stock Exchange, up 6.8% from the previous close. End
Edited by Ashish Shirke
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