Having recently released its 2021 financial results this week, Ambuja Cements has announced expansion plans as it looks towards reaching 50Mta of cement capacity. ICR Research investigates the market strategy and growth potential for one of Holcim's leading Indian subsidiaries.

Ambuja Cements is one of the largest cement producers in India with a current cement capacity of 31.45Mta. The current Managing Director and CEO, Neeraj Akhoury, announced that the company's Managing Board is intent on exploring a capex programme to increase the company's market presence in India. "The Board has approved in principle investment of INR35,000m (US$468.6m) for a cement grinding expansion plan of potential 7Mt[a] across our existing grinding units at Sankrail and Farakka and at a greenfield location at Barh, in Bihar. This is supported by a 3.2Mt[a] brownfield clinker expansion at our existing integrated plant in Bhatapara, Chhattisgarh," said Mr Akhoury.

Capex expansion
Presently, the company's main distribution is in its northern stronghold where most of its integrated and grinding plants are located. It also has two grinding plants of Farakka and Sankrail, in the east, and the Surat (Magdala) grinding plant located in the west, near its head office in Mumbai. However, south of Mumbai the company has only three distribution terminals in operation at Panvel, Mangalore and Kochi. The main focus of the next expansion is to strengthen its eastern presence in Bengal and Chattisgarh.

The northwest region was also strengthened last year by the completion of the Marwar Mundwa grinding plant in the Naguar district of Rajasthan. This plant has the potential to see a further 3Mta clinker expansion that would enable the increase of cement sales to 5Mta in the future. In addition to this, a 1.5Mta expansion project at the Ropar grinding unit in Punjab, northwest India is scheduled to be commissioned in 2023. 

India's growth potential
Ambuja Cement is looking to catch up with the demographic growth curve that will see India’s population grow from 1.37bn in 2030 to 1.5bn in 2050. The country's urban population will pass 600m by 2030, up from 377m in 2011. The current housing demand has seen a 71 per cent YoY increase in sales in the country’s largest seven cities in 2021. A total of 8m houses are also budgeted for completion under the PMAY scheme for urban and rural dwellings in FY23 as the country aims to improve its living standards.

Cement demand is further boosted by an 11 per cent budgetary increase in government infrastructure spending. A total of 25,000km of highways and roads are to be completed in FY23 while there is also a momentum developing in terms of urban infrastructure, port modernisaiton and metro projects.

Furrthermore, the e-commerce boom is spurring growth in the demand for warehouse space while data centres and energy storage systems are expected to see further investment as they have been granted infrastructure status.

Ambuja enhances its efficiency
Ambuja Cement enters this period of opportunity for increased sales with a need to improve its energy efficiency. The energy efficiency programme starts with the installation of 54MW of WHR at its Darlaghat, Bhatapara and Marwar plants and with further plans to extend this to the Ambujanangar and Maratha works. 

Alternative fuels are similarly being increased with a thermal substitution rate (TSR) of above nine per cent at the Maratha plant, while the 4Q21 saw the commissioning of an alternative fuel feeding system at the Ruari plant with 4.65 per cent TSR achieved. 

Raw material costs efficiency is being driven by the installation of fly ash dryers at the Rabriyawa, Ropar, Dadri, Nalagarh and Bathinda cement plants. The company's blended cement market share is more than 89 per cent. In addition, Ambuja Cements has a low clinker factor of 63 per cent and an overall TSR of 5.1 per cent.

On top of these initiatives, as part of the Holcim group, Ambuja Cements is implementing the 'Plants of Tomorrow' programme to scale up its transition to digital plants. This will include automation and apps for sales and marketing as well as digitalisation of truck fleets and logistics.

Decarbonisation and sustainability plans
Ambuja Cements has signed the Business Ambition for 1.5˚C along with science-based targets and is committed to reducing Scope 1 and 2 greenhouse gas emissions per tonne of cementitious materials by 21 per cent and 43 per cent, respectively, by 2030 from the base year of 2020.

Sustainability will be measured by four main pillars linked to UN Sustainability Goals. These include:
1. climate and energy: a CO₂ reduction target of 452kg CO₂/t cementitious material by 2030
2. circular economy: waste material reuse of 21Mt in 2030 from 8.6Mt in 2021
3. water and nature: in terms of savings in water consumption, a target has been set of 62l/t of cementitious material in 2030, from 58l/t cementitious material in 2021
4. people and communities: value shared rising to 3.5m beneficiaries in 2030, up from 2.8m beneficiaries in 2021. 

Outlook
India has a GDP growth estimated at 9.2 per cent for FY22 while Fitch Ratings and S&P India forecast GDP to increase by 7.6 and 7.8 per cent, respectively in fiscal 2023. The Government of India is even more bullish in its 8-8.5 per cent economic growth forecast in FY23. Such economic factors have been read as a green light by Ambuja Cements to accelerate its growth and ramp up its performance.

Published under Cement News