Cement demand to increase on housing, infrastructure projects: UltraTech Chairman Kumar Mangalam Birla

Kumar Mangalam Birla said the UltraTech board of directors had approved fresh capital expenditure of Rs 5,477 crore towards increasing capacity.

Demand for cement in India is expected to increase in the near future on the back of government policies and enhanced investment in infrastructure, UltraTech Cement Chairman Kumar Mangalam Birla said.

“Government spending on infrastructure projects and affordable housing schemes such as the Pradhan Mantri Awas Yojana with enhanced budgetary allocations remain the primary drivers of growth for the cement industry,” Birla said in a note to shareholders in the company’s annual report for 2020-21.

Birla said the cement industry shrank 10-12 percent due to the COVID-19 pandemic and the nationwide lockdown from late March to end-April 2020 was a huge challenge for all manufacturing industries.

“However, with the central and state governments taking measured steps towards unlocking the economy, some encouraging trends were seen from the latter part of May 2020,” Birla said. “Since then, the industry has been on a volume growth path, driven mainly by the government’s ‘Housing for All by 2022’ mission and large infrastructure projects.”

UltraTech recorded net revenue of $5.95 billion (Rs 44,239 crore) and an EBITDA of $1.66 billion (Rs 12,302 crore) during FY21, according to the annual report.

The domestic cement industry is poised for a surge in volumes after allocations in the Union Budget for FY22 for infrastructure, affordable housing and road projects to fuel the economy.

India is the second-largest cement producer in the world and accounted for over 7 percent of the global installed capacity, according to India Brand Equity Foundation, a trust set up by the Department of Commerce. India’s cement production capacity was almost 545 million tonnes in FY20, of which 98 percent was with private companies.

Demand for cement is expected to reach 550-600 million tonnes per annum by 2025, according to IBEF.

Birla said the UltraTech board of directors had approved fresh capital expenditure of Rs 5,477 crore towards increasing capacity by 12.8 million tonnes per annum with a mix of brownfield and greenfield expansion.

“The additional capacity will be created in the fast-growing markets of the east, central, and northern regions of the country,” Birla said.

This expansion will be in addition to the 6.7 million tonnes per annum capacity that the company is currently building in Uttar Pradesh, Odisha, Bihar and West Bengal. These new capacities are expected to go on stream in phases during FY22 and FY23.

“This significant investment in a core infrastructure sector will accelerate the wheels of economic activity and aid the kickstart of the private investment cycle. Our capex ambition is fortified both by the strength of UltraTech’s balance sheet and our conviction on India’s inherent growth potential,” Birla said.

When the latest round of expansion is completed, UltraTech’s capacity will increase to 136.25 million tonnes per annum, reinforcing its position as the third-largest cement company in the world outside of China, the company chairman said.