The Aditya Birla Group, which owns market leader UltraTech Cement and Grasim Industries, is looking to add capacities to their cement business through more acquisitions, according to Chairman Kumar Mangalam Birla. The comments come as the war for market share sparked an acquisition spree in the Indian cement industry.
While analysts expect that the big boys of the cement industry will continue to take over smaller companies and consolidate to protect and gain market share, they flag that the heightened ambitions of the major players may lead to price wars even as new capacities are added, hurting margins.
"For the cement business, we are looking at organic and inorganic ways," Birla said, responding to Moneycontrol's query at the Birla Opus launch press conference.
The Kumar Mangalam Birla led-UltraTech said on November 30 that it will acquire the cement business of Kesoram Industries on a share swap basis, the effective merger date is expected to be on April 1, 2024.
The deal would add capacity of 10.75 million tonne per annum (MTPA). UltraTech currently has a consolidated capacity of 142.79 MTPA of grey cement, highest amongst its peers.
"Inorganic is always opportunistic and each transaction has to be examined on its fitment with UltraTech given the fact that we are pretty densely present in the country," UltraTech's Chief Financial Officer Atul Daga told analysts in a post-earnings call earlier last month.
The company is also making organic additions. On February 21, it announced commissioning of a 1.8-MTPA brownfield cement
capacity at Kotputli, Rajasthan. Adani-owned Ambuja Cement, too announced investments worth Rs 1,000 crore to set up a 4 MTPA Cement Grinding Unit in Godda, Jharkhand.
The competition heated up after Adani's take over of Ambuja Cement and ACC Ltd from Holcim Group of Switzerland in 2022. The deal placed Adani in direct competition with UltraTech.
High bets on demand
Indian cement makers are bullish on the demand environment amid increased government spending on infrastructure, rural development and expansion of the housing sector. "The scale of our ambition is now being matched by the scope of infrastructure revolution set to unfold," KM Birla said in his speech on February 22.
"Our cement fortifies the expanding highways," he said while noting the economy's strength supporting various businesses under the group.
Earlier this month, the government hiked in infrastructure outlay for FY25 at Rs 11.11 lakh crore. The move was cheered by the cement industry.
During the third quarter results, industry executives said they were confident of demand growth in the current quarter and shrugged off any slowdown concerns due to the upcoming parliamentary elections.
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