UltraTech Cement falls 10% in three days; loses Rs 17,157 crore-market cap

Shares of UltraTech Cement hit a fresh 52-week low of Rs 5,412, down 3 per cent on the BSE in Tuesday’s trade. The shares have fallen 10 per cent in the past three trading days after the company announced around Rs 12,900 crore-capital expenditure (capex) plan. The stock of the largest player in the cement industry was trading at its lowest level since February 2021.

A sharp decline in the stock price of UltraTech has seen the company lost Rs 17,157 crores of market capitalisation in the last three trading days. As of 11:12 am; UltraTech's market capitalisation stood at Rs 1.56 trillion, as against Rs 1.73 trillion on Thursday, June 2, 2022.

With the decline in previous three days, UltraTech's market price has slipped 35 per cent from its record high level of Rs 8,267 touched on November 8, 2021.

 On June 2, the company's board approved Rs 12,886 crores ($76/ton) of capex plan for setting up 22.6mt of new cement capacity (17 per cent of its capacity post completion of ongoing projects).

The expansion will be a mix of brownfield and greenfield capacity across the regions to cater to future growth. The new capacity will be added through integrated units, grinding units and bulk terminals, and will be funded through a mix of debt and internal accruals. 

Commercial production from these new capacities is expected to go on stream in a phased manner, by FY25. UltraTech's current expansion program is on track and estimated to be completed by the end of FY23.

Upon completion of the latest round of expansion, the company's capacity will grow to 159.25 mtpa, reinforcing its position as the third largest cement company in the world, outside of China, it said in a press release.

Meanwhile, besides UltraTech, the market prices of J K Cements, Ramco Cement, Shree Cement and Birla Corp have also declined by 10-14 per cent in the past one week, quoting at their respective 52-week lows. In comparison, the S&P BSE Sensex was down 1 per cent during the week.

In current times of weak demand, high fuel costs and entry of a new player (Adani group), any significant capacity announcement may be viewed negatively by the market, according to analysts at Emkay Global Financial Services.

Overall, analysts at ICICI Securities believe the next two quarters will remain challenging for the cement industry as it will battle both weak demand (owing to monsoon) & heightened costs. Key trigger to watch would be quantum of price hikes & its durability, going forward, the brokerage said in a Q4 earnings wrap.