UltraTech expanded capacity, lowered debt in FY23, analysts expect net cash-position in FY24 

UltraTech Cement

UltraTech Cement cut debt in the last quarter of FY 23 to the lowest level in six years, putting it on course to turning net-cash positive this financial year on the back of healthy cash flows.

Sales by volume grew 4 to 5 percent than those of the cement industry’s average – a pace UltraTech expects to maintain in the current financial year, a top executive said.

Highlights of UltraTech’s FY 23 performance included record sales volumes, debt reduction at a faster pace and fresh capacity addition of more than 12 million tonnes.

In FY 24, the company is expected to improve cash flows, expand market share and start work on its second phase of capacity expansion.

As of March 2023, UltraTech’s net debt was Rs 2,702 crore, lower than the Rs 3,901 crore in FY 22. Analysts at Motilal Oswal said the dip in net debt was more notable on a sequential basis and expect the company to turn net cash-positive in FY 24.

“UltraTech’s net debt has declined notably from Rs 7,720 crore in December 2022. It has been generating strong cash flows and we estimate cumulative operating cash flow/ free cash flow to be at Rs 23,800 crore /Rs 12,100 crore over FY24-25. We estimate the company to become net-cash positive in FY24,” wrote the analysts in an April 29 note.

Debt lowest in six years

At Rs 2.702 crore, UltraTech’s net debt is at its lowest since March 2017, data available through investor presentations show. For the quarter ended March 2017, the company had said it was net-cash positive on a standalone basis.

For FY 23, UltraTech’s consolidated debt fell to Rs 9,901 crore from Rs 10,203 crore a year ago.

The company, in its investor presentation, noted that it had deleveraged its books further after capital expenditure spending and a dividend payout.

In terms of capacity expansion, UltraTech said in a press release that during the last financial year, the company commissioned 12.4 million tonnes per annum of additional capacity of grey cement and 2.2 mtpa of brownfield cement capacity at Patliputra.

The company also said it had started work on the second phase of expansion of 22.6 mtpa and civil work was in full swing at most sites. Commercial production from these new capacities is expected to go on stream in a phased manner by FY 25/FY 26, it said in its statement.

Planned capital expenditure

Executive Director and Chief Financial Officer Atul Daga said in an earnings call with analysts on April 28 that capital expenditure of roughly Rs 6,000 crore was estimated for the next two financial years.

Along with capacity expansion, UltraTech also looks to expand market share. Daga said the company expects to continue to grow at 400-500 basis points higher than the industry growth rate in FY 24. One basis point is one-hundredth of a percentage point.
For the full FY 23, UltraTech reported a 14 percent increase in domestic sales volumes, roughly 400 basis points higher than the estimated growth rate for the industry in the same period.

The company sold 101.7 million tonnes of cement in the India market in the last financial year and is already the largest manufacturer and seller of cement in India.