UltraTech to go ahead with planned expansion

UltraTech Cement, the second-largest manufacturer after Holcim’s ACC in terms of sales and capacity, does not intend to rein in expansion plans even though the domestic market is likely to see overcapacity in the next few quarters.

The Aditya Birla Group company has already spent over Rs 3,000 crore on projects to take its production capacity from 17 million tonnes (mt) to 21.9 mt and plans to further scale up till 23.1 mt by June-end. The company had, last year, decided to spend around Rs 2,400 cr on this till 2011.

KC Birla, chief financial officer, told Business Standard, “We will continue to maintain our market share and, if required, we will go ahead with more capacity additions to ensure we don’t become a loser in the market.” UltraTech, which currently has a share of 9 per cent in the domestic market, has units in Maharashtra, Orissa, Chhattisgarh, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu.

Industry analysts say cement players have good cash flows and new expansion might be far-seeing, as any new project would take at least two to three years to go onstream. By when, the cement cycle will once again be on the upturn, they added.

The Rs 6,500 cr (sales) cement maker does not see any adverse impact on the industry in the first half of the current financial year. However, it has kept its fingers crossed on how the market scenario turns out in the second half. Even so, it is optimistic for the current financial year on the back of three factors.

“In H1FY10, we do not see any problem. But in the second half there will be pressure on margins,” Birla said. Adding, “Our volume expansion in Andhra Pradesh, captive power plants and softened coal prices will help us to some extent in difficult times.”

In last year’s annual general meeting, the Group's chairman, Kumar Mangalam Birla, had said new power units would pare UltraTech's costs and offset the effect on margins.

UltraTech has commissioned 192 Mw of captive thermal power plants in fiscal year 2009, pushing its power capacity to 236 Mw.