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UltraTech to invest Rs 12,886 crore to increase capacity

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UltraTech Cement, India’s largest cement producer, on Thursday announced plans to invest Rs 12,886 crore to increase its production capacity by 22.6 million tonnes per annum (MTPA) through a mix of brownfield and greenfield expansion.

Following the capacity addition, the Aditya Birla Group firm’s total capacity will rise to 159.25 MTPA, strengthening its position as the third-largest cement company in the world, outside of China. This would be achieved by setting-up integrated and grinding units and bulk terminals across the country, the firm said in a statement.

The commercial production from these new capacities would go on stream in a phased manner by FY25. UltraTech’s current expansion program is on track and estimated to be completed by the end of FY23.

“This ambitious capacity expansion plan is a significant milestone in the ongoing transformational growth journey of UltraTech. The company has more than doubled its capacity over the last five years and is committed to meeting India’s future needs for housing, roads, and other infrastructure,” Aditya Birla Group chairman Kumar Mangalam Birla said.

“This investment is backed by a strong conviction on India’s growth potential as well as a deep and nuanced understanding of the market dynamics of the cement industry. Given the size of the investment outlay, I am confident that this new capacity creation will have a multiplier effect leading to jobs and growth across multiple regions in India,” Birla added.

The decision to hike production capacity was taken at the company’s board meeting held on Thursday.

Last year, the company had announced plans to invest about Rs 6,500 crore to increase capacities by 19.8 MTPA to 136.25 MTPA from 119.96 MTPA in a phased manner by this fiscal-end.

The Indian cements are expected to add 150-160 MTPA of production capacity by 2027, as India’s per capita consumption stands at 242 kg, much below the global consumption of 530 kg. India is the second largest cement producer in the world, accounting for about 8% of global cement production with an estimated production capacity of 550 MTPA, industry experts said.

The Indian cement sector is also getting tailwinds due to the government’s focus on infrastructure and revival of the housing sector.

UltraTech Cement’s plans to hike capacity follows Adani Group’s acquisition of Holcim’s Indian entities – Ambuja Cements and ACC – for $10.5 billion last month, a move that may further intensify consolidation in the industry due to heightened competition and as big players want to maintain or enhance their market share. The top-rung players – including JSW Group – might look at acquiring the stressed assets available in the country.

The stressed assets include Jaypee Group (11.45 MTPA), Andhra Cement (2.6 MTPA), Cement Corporation of India (8.5 MTPA), Vadraj Cement (6 MTPA) and Bheema Cement (1.4 MTPA). The wave of consolidation is expected to be kick-off by Adani, which is likely to merge Ambuja Cements and ACC into a single entity.

Ambuja Cement has an installed capacity of 31.45 MTPA of cement and ACC is at 34.45 MTPA, and together these companies have a total production capacity of 65.9 MTPA. JSW Group has an installed capacity of 16 MTPA as of March 2022, and the company is targeting to increase it to 25 MTPA by FY24.

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