UltraTech Cement to invest Rs 5,477 cr to raise capacity by 12.8 mn tonnes

Expansion could be a mix of brown and green field projects; demand in eastern part of India strongest of all regions, say brokerages

UltraTech Cement board today approved an investment of Rs 5,477 crore for raising capacity by 12.8 million tonne, which would be a combination of brown and green field expansions.

Citing the economic recovery in the domestic market and the upticking demand for cement, the current approved investment amount would be over and above the planned Rs 1,500 crore capex for FY21.

The Aditya Birla Group company in its release informed that the additional capacity will be created in the fast-growing markets of the east, central and north regions of the country.

Demand in the East has been the strongest of all regions, supported by government spending and increased labour availability as migrant workers returned to their hometowns due to Covid-19, said a recent MotilalOswal report.

“This significant investment in a core infrastructure sector will accelerate the wheels of economic activity and aid the kickstart of the private investment cycle. The capital outlay, given the current economic backdrop, is aligned with the Government’s Atmanirbhar Bharat scheme. It is also a marker of UltraTech’s ascent from being India’s No.1 cement player to a national champion,” the release quoted Kumar Mangalam Birla, chairman at Aditya Birla Group as saying.

The new capacities is expected to go on stream in a phased manner by Q4FY23, said the release. Of the total capacity expansion, 72 percent is brownfield, while balance is greenfield. Alongside, the investment amount for the expansion is funded via internal accruals, said the investor presentation on BSE filing.

“The cement industry has been witnessing healthy volumes post relaxation of lockdown, on the back of the government’s thrust on infrastructure, underlying demand from the rural economy and individual home builders. Given its pan-India presence which will be further strengthened by the capacity expansion, UltraTech will be well positioned to support the rising demand for cement in the country,” Birla added.

This expansion includes the existing approval for the cement plant at Pali in Rajasthan, in addition to the company’s 6.7 million tonne capacity expansion currently underway in Uttar Pradesh, Odisha, Bihar and West Bengal, which has picked up pace and is expected to get commissioned by FY22 in a phased manner.

This capacity addition would not impact the ongoing deleveraging program which is on track to make UltraTech debt free by the time the expansion program is completed, informed the release.

Upon completion of the latest round of expansion, the company’s capacity will grow to 136.25 million tonne, reinforcing its position as the third largest cement company in the world, outside of China.