The Indian cement industry is on the brink of transformation as major players like UltraTech Cement and Ambuja Cements engage in aggressive consolidation strategies, highlighted by UltraTech's acquisition of India Cements. The Aditya Birla Group's UltraTech, the market leader with 156.66 million tonnes per annum (MTPA) capacity, has displayed remarkable ambition, aiming for 200 MTPA by financial year 2027.
With projections of approximately 8% sales growth backed by elevated government infrastructure spending, the industry's outlook is decidedly optimistic. Despite grappling with setbacks like moderate capacity utilization, falling prices, and sluggish volume growth, experts believe the market is positioning itself for recovery.
According to reports, UltraTech and Adani Cements have collectively invested $4.5 billion to acquire over 50 MTPA capacity as part of their strategic expansions. Adani Cements, having quickly established itself through acquisitions of firms like Sanghi Industries and Penna Industries, aims to reach 140 MTPA by FY28, reflecting the sector's fierce competition.
Notably, UltraTech's acquisition of India Cements not only expands its capacity but also fortifies its competitive edge against adversaries like Adani. This move is expected to influence market dynamics significantly, as consolidation continues to reshape the industry. Rakesh Surana, partner at Deloitte India, remarked on this trend: "2024 was a year of consolidation for the cement industry, marked by significant mergers and acquisitions. This trend has highlighted a structural shift in the sector, with the largest companies accounting for substantial share of overall capacity."
While the past year presented challenges—including decreased average prices, which dropped from Rs 365 per 50kg bag to Rs 330—the future is set against the backdrop of anticipated infrastructure investments triggering increased demand. During the first half of FY25, market analysts, including Vinayak Vipul from EY-Parthenon, noted, "The Indian cement industry has witnessed muted volume growth of 4% to 5% compared to over 10% in the past three years, driven by the impact of elections and extended monsoon."
The Cement Manufacturers’ Association has stated the country's cement capacity could expand to 690 Metric Tonnes (MT) from 650 MT thanks to these strategic mergers and rising infrastructure initiatives. This reflects strong demand expected from housing and infrastructure projects, which will be key drivers for recovery.
Neeraj Akhoury, Managing Director of Shree Cement, expressed confidence in the industry's recovery, stressing the importance of improving price realizations and capacity utilization amid the declining price environment. He sees the combined focus on sustainability and innovations as pivotal forces driving the expected growth: "We are confident improving price realizations and capacity utilization will drive the industry's recovery and growth. The increase in capital expenditure from both government and private sectors will provide the necessary impetus to India’s growth story."
The heightened activity within the Indian cement industry holds promise for upcoming years as key players continue to position themselves strategically through mergers and expansions. While challenges persisted, including labor shortages and prolonged weather disruptions, the long-term outlook, buoyed by government spending, indicates strong potential for growth.
ICRA's Tushar Bharambe anticipates recovery patterns will emerge as volumes pick up: "Cement volumes are expected to pick up in the latter half of FY25, backed by likely increase in rural consumption and sustained healthy demand for urban housing." This optimism suggests the industry anticipates growth not only through recovery but potentially through groundbreaking changes as market dynamics evolve.
With several planned expansions, the cement sector is aiming to add 70-75 MTPA grinding capacity from FY25 to FY26. Experts forecast capacity utilization to remain moderate at around 70%, with the expectation of considerable improvements as governmental policies favor infrastructure development.
Overall, the Indian cement industry stands at the threshold of significant change, with UltraTech and Adani leading the charge through strategic acquisitions and expansions. Positioned for growth, the sector's future hinges on sustained demand from infrastructure initiatives bolstered by corporate investments, heralding what could be an era of profitability and expansion.
