UltraTech keeps growing as it passes 150Mta of cement capacity

This week UltraTech (Aditya Birla Group) announced it planned to expand again with the acquisition of a 31.6 per cent stake in UAE-based RAK Cement. While the group has overseas representation in Bahrain, China, Sri Lanka, UAE and Yemen, its power base is in India. It is now the third-largest cement producer in the world, outside China, and has a grey cement capacity of 151.6Mta.

The company took 36 years to pass 100Mta of cement capacity and yet has added the next 50Mta in less than five years. In the last year alone, UltraTech has expanded its cement capacity by 18.7Mta and it has an ongoing expansion of 35.5Mta across 16 locations, and by March 2025 aims to capture Kesoram Cement (Birla Shakti Cement), which has a cement capacity of 1.75Mta. UltraTech is in the process of expanding its grey cement capacity globally to 174.2Mta by FY25-26 and 188.9Mta by FY26-27, according to ICICI Direct Research. By FY27-28, this target will be 200Mta.

The company has already boosted revenue by 25.9 per cent between FY20-21 and FY23-24, while EBITDA and profit after tax have risen by 5.9 and 15.8 per cent CAGR during this period. Volume growth has risen by approximately 13 per cent YoY in FY23-24. 

As of March 2024, UltraTech had 23 per cent of its cement capacity located in north India, 21 per cent in west India, 19 per cent in central and east India, 14 per cent in southern India and just four per cent located overseas. To what extent the company aims to grow its overseas capacity is not yet clear.

The company’s phase III domestic expansion plan includes an additional 9.3Mta of brownfield expansion and 12.6Mta of greenfield expansion as well as 6.4Mta of bulk terminal capacity addition.

UAE purchase

The purchase of RAK Cement will be made through the UltraTech subsidiary, UltraTech Cement Middle East Investments Ltd (UCMEI). UltraTech Cement is offering to buy more than 158m shares of the Abu Dhabi-listed company. UltraTech Cement entered the UAE market in 2010 when it acquired ETA Star Cement for US$380m.

UCMEI currently operates in Bahrain, UAE and Yemen. The UAE plants include the 0.9Mta integrated Ras Al Khaimah Co for White Cement & Construction Materials plant, Star Cement RAK's 2.8Mta clinker unit, the 1.37Mta grinding facility of Arabian Cement Industry LLC (Star Cement) and Amjan Cement Factory’s 0.3Mta grinding plant. UCMEI has 2.8Mta of grey clinker capacity and 1.67Mta of grey cement capacity in UAE. The addition of RAK Cement will add 0.96Mta of clinker capacity and 1Mta of cement capacity. This will lift UCMEI to the eighth-largest cement producer in the country.

The UAE cement market has slowed, but consolidation is required with the abundance of single plant owners. The one project under construction is JSW Cement’s 1.32Mta clinker expansion project at Fujairah. The total cement capacity in the country is now approximately 43.1Mta, according to The Global Cement Report, 15th Edition.