What UltraTech and JSW Cement plan to do after losing Holcim deal to Adani

Speeding up capacity expansion would be top focus area, said analysts

UltraTech and JSW Cement, who lost out to the Adani group, in the race to acquire Ambuja Cement and its subsidiary ACC from parent Holcim AG, are now likely to focus on speeding up their capacity expansion plans, analysts tracking the market said. JSW declined comment when contacted. A text sent to Aditya Birla group, which owns UltraTech, elicited no response till the time of going to press.

However, UltraTech, according to analysts, plans to take its cement capacity to 137 million tonnes per annum (mtpa) by the end of the current financial year (FY23). The country's largest cement manufacturer currently has a capacity of 120 mtpa, sector experts said. JSW Cement, on the other hand, intends to take its capacity to 25 mtpa by FY24 from 16 mtpa now, analysts said.

"Both UltraTech and JSW Cement will continue to look at inorganic growth opportunities. However, there are not enough large targets to go after following the Adani-Holcim deal. What you have are smaller players in the market. Organic growth therefore is a more effective way of adding scale for UltraTech and JSW Cement, though both companies will keep a close watch on how competitor Adani maneuvers in the market," Manish Valecha, lead cement and construction analyst at Anand Rathi Securities, said.

The Adani-Holcim deal puts the Gujarat-headquartered group in the number two spot within the cement industry, after UltraTech, with a capacity of 70 mtpa. The Adani group has indicated that it would like to double its capacity in the coming years, though this may not be easy, said analysts, given the paucity of large targets in the marketplace.

In a call with analysts recently, UltraTech said that it was on track to complete its expansion projects, including adding around 16.5-17 mtpa of capacity in FY23, out of a total expansion plan of around 19.5-20 mtpa. At a broader level, the company intends to touch 160 mtpa in terms of total installed capacity by FY30, analysts said.

JSW Cement, on the other hand, is not a listed player yet. Apollo Global Management and Synergy Metals Investment are existing investors in JSW Cement, experts said. They had invested Rs 1,500 crore of the Rs 3,600-crore capital expenditure (capex) planned last year by the company to increase its capacity.

JSW had also lined up funds of $7 billion to acquire a controlling stake in ACC and Ambuja Cement from Holcim before it was outbeaten by the Adani group for $10.5 billion. UltraTech, on the other hand, needed to shed capacity to meet Competition Commission of India rules to qualify for the transaction.

"India is currently witnessing a strong fundamental demand growth as compared to the world, which is driven from infrastructure, housing and rural demand. The (UltraTech) management had suggested that rural demand would continue strongly into FY23 and FY24 led by better monsoon and improving rural income," Abhishek Lodiya, lead analyst, cement at Yes Securities, had said in his recent Q4 result review of Ultratech.

In a report on UltraTech, research analyst Kunal Motishaw of Reliance Securities said that the company had been witnessing good growth over the years, which was expected to sustain into the future, owing to its capacity addition plan in FY23.

"UltraTech enjoys 25 per cent market share on a pan-India level with dominant presence across regions. It is on a firm footing to cash in on the secular consumption opportunity for cement in the future," Motishaw said.