FY20 focus would be debt reduction, improving cost efficiency: UltraTech

The debt reduction focus will continue into FY21, said Atul Daga, chief financial officer for UltraTech

After three years of merger and acquisitions, India’s largest cement producer UltraTech will focus on debt reduction in the next two financial years, top officials at the cement maker said. 

“The focus for FY20 would be debt reduction and improving cost efficiency,” said Atul Daga, chief financial officer for UltraTech, adding, ”The debt reduction focus will continue into FY21.” The Aditya Birla group’s cement company, at present, has a debt-to-ebitda ratio of 2.5 times. Ebitda is earnings before interest, taxation, depreciation and ammortisation.

“We look to reduce this to below two times in FY20 and below one time by FY21,” Daga added.

Daga in an interaction with Business Standard had earlier said the company is looking to cut down debt by Rs 3,000 to Rs 4,000 crore annually.

According to a Prabhudas Liladher report, Ultratech Nathdwara Cement Limited (the erstwhile Binani Cement) will also reduce debt by selling non-core assets in the UAE and China. It plans to sell these in the current financial year. Daga said the company expected close to Rs 1,000 crore from these assets, which would also be used to pare debt.

For the March 2019 quarter, the company in its investor presentation said its net debt reduced by Rs 2,205 crore, which was now at Rs 19,593 crore as of March 2019. Ultratech’s gross borrowing more than doubled from Rs 8,474 crore in March 2017 to Rs 22,818 crore in March 2019. Most of Ultratech’s debt addition has been on the back of cement acquisitions in the last three years.

In June 2017, UltraTech acquired 21.2 million tonnes cement capacity from Jaiprakash Associates and another 6.25 million tones cement capacity through its Binani Cement acquisition in 2018. The company is in the process to acquire Century Textiles cement assets, which is likely to be completed by the September quarter of the current financial year, according to the company’s investor presentation.

Ultratech’s cement capacity as of March 2019 stood at 98.8 million tonne. Analyst reports quoted the management as saying that it expected improvement in the industry’s capacity utilization as 15-20 MT capacity addition is expected to lag behind incremental demand of 28-30mt in FY20E.