UltraTech Cement: growing a giant

UltraTech Cement (Aditya Birla group) has been increasing its cement capacity this week with the opening of Line II at its Bara grinding unit in Uttar Pradesh, India. This has taken the group's cement capacity up to 114.55Mta, consolidating its position as one of the world's largest cement manufacturers outside of China.

The company's rise has been truly outstanding since its establishment of the first plant for Grasim (Vikram Cement) and Indian Rayon (Rajashree Cement) in 1983-88. From a foundation of 1Mta of production, it had already passed 31Mta in 2004 and 51.8Mta by 2011. However, the last decade has seen its growth accelerate to more than double its cement capacity.

UltraTech Chairman, Kumar Mangalam Birla, commented that the company is geared for success: "Personally, for me, UltraTech’s stellar performance doesn't come as a surprise. The hallmark of a leader is sustained high-quality performance cutting across business cycles and market disruptions. And UltraTech isn’t just a leader. It is a national champion."

The company is amid a large capex programme that will see the group expand to 136.25Mta in its latest expansion phase. Alongside this impressive programme of expansion, the company reported average grey cement capacity utilisation of 70 per cent in its latest annual report, and total output climbed to 82.72Mt of cement in 2021. The company also produced 1.3Mt of white cement in 2021 with capacity utilisation at 85 per cent in its white cement plant. At the end of 2021, the company operated 23 integrated cement plants, 27 grinding units and seven bulk packaging terminals with a dealer network of more than 100,000 partners. It also operates 150 ready-mix plants in 50 cities.

Regional strength
UltraTech Cement has its largest presence in the west region of India where it had a cement capacity of 27.7Mta at the end of 2021, 25 per cent of its total cement capacity. In the north it records 23.8Mta or 21 per cent of its total cement capacity and the central region is a similar size at 23.3Mta. In the south UltraTech Cement achieves 20.5Mta of cement capacity, 18 per cent of its total capacity while the east is its smallest region at 16.1Mta or 15 per cent of its total cement capacity.

Brownfield expansion
The strategy has been for brownfield expansion as seen in the Bara grinding plant. UltraTech Cement has targeted an average capex cost of below US$60/t with an average annual capex budget of US$600m including growth capex. This led to 12.8Mta of expansions approved and under commissioning in FY20-21, 75 per cent of which were brownfield projects.

The upcoming expansion will increase the group's presence in the north and central areas while rapid expansion in the east will give the company more of a pan-Indian presence (see Table 1). UltraTech forecasts a capital outlay of INR65,270m (US$884.3m) in the next two years to reach 136.25Mta. INR10,500m is designated for ongoing expansion and INR54,770m is proposed for a mix of brownfield and greenfield projects. By FY23 the company aims to have added 11.4Mta of clinker capacity and 19.5Mta of cement capacity in India.

UltraTech's national reach
The company has also been developing its logistics coverage, which now enables 4.4m bags of cement to be distributed across 2400 destinations (catering to 31,000 daily orders) by road (73 per cent), rail (25 per cent) and sea (two per cent). It has built up a truck fleet of 37,500 vehicles with daily truck movements of 8500.

Summary
The fast pace of UltraTech Cement's rise has seen it rise to be India's leading cement producer in a very short time. It is now concentrating on developing its eastern region production base while maintaining its market share in the strong markets of the north and central areas.

To read more on India's cement market see ‘India is looking at recovery.’