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With the Rs 16,189-crore acquisition of JP Associates' units across the country, UltraTech has acknowledged that it is an undisputed leader in India's 420-million tonne cement industry.
The Aditya Birla Group-promoted company's current capacity is 66.3 million tonnes per annum (mtpa). After completion of the JP deal, the capacity will shoot up to nearly 90 mtpa.
Responding to shareholders’ questions at the company’s 16th annual general meeting, Kumar Mangalam Birla, chairman of Aditya Birla group, said: “No (cement) player is a threat to UltraTech.”
The statement is of importance as it comes within weeks after the Birla cement giant finalised a deal to acquire 21.2 mtpa capacity of Jaiprakash Associates. Interestingly, the period witnessed yet another deal wherein Nirma, coming from nowhere, took away Lafarge’s 11 mtpa India assets.
UltraTech, known for its fast acquisitions, was restricted by the Competition Commission of India (CCI) from going after Lafarge' assets. “Because of the restrictions by CCI in the Lafarge case, we could not bid for that asset,” added Birla. Otherwise, UltraTech would have crossed the 100-mtpa mark, if it had bagged Lafarge assets.
The JP deal, which is expected to consummate within the next 12 months, was an important milestone in UltraTech's growth in India, providing it the much-needed push to spearhead the cement industry.
Else, the company, thus far, was almost neck-and-neck with Swiss cement giant Holcim, which controls its India operations through two of its Indian subsidiaries - ACC and Ambuja Cement.
However, Birla wants to have some pause on his acquisition drive. “We have no acquisition plans (as of now). Our current focus is to make cash out of the JP deal,” he said.
Adding: “There will be some restrictions (on acquisitions) after 90 million tonnes, but there will be enough opportunities across the regions.”
The capacity utilisation of UltraTech was 75 per cent in FY16. “(This is likely to go up to) 80 per cent next year after JP acquisition. We will have a sizeable presence in states where we are not present now,” he added.
UltraTech, which plans to spend Rs 1,600 crore on capex in FY17, has a debt-to-equity ratio of 0.02. Birla termed the company debt-free on a net debt basis.
Shares of UltraTech were trading close to their 52-week high of Rs 3,600 during intra-day trades before paring its gains. The stock closed marginally up on Tuesday at Rs 3,505.90 a share on the BSE.
The price-to-earning (PE) ratio is rich at 42 at current price. Shareholders were in a tizzy about the company's valuation on the stock exchanges. However, Birla said: “High PE is a reflection of how strong your company is. You should be happy about it.”
With a market capitalisation of Rs 96,215 crore, UltraTech has a strong balance sheet and robust cash flows. The company foresees that with the government's focus on infrastructure and housing, it is poised to benefit from the growth in cement demand.
