Indian cement sector is ready to grow rapidly with the boost from infrastructure construction, urbanization, and initiatives such as the “Housing for All” program. Out of the major players in this industry, Ambuja Cements and UltraTech Cement are among the strongest prospects for long-term investment. The article compares these two companies based on important financial and operational indicators to identify which one is a better investment opportunity for investors.
Financial Comparison
The financials of the two companies for Q3 FY25 give an indication of their operational prowess.
Ambuja Cements had a consolidated quarterly revenue of INR 9,329 crores, EBITDA of INR 1,712 crores, and an EBITDA margin of 18.4% and EBITDA per ton of INR 1,038. It registered a 17% year-on-year volume expansion, including 1.4 million tons from newly acquired assets such as Sanghi and Penna, which are in ramp-up stages. The company is nearly debt-free, having cash balance of INR 5,755 crores as on December 31, 2024, and net worth of INR 63,000 crores, underpinning expansive capex plans of INR 8,000 crores for FY25.
UltraTech Cement, however, posted a higher consolidated net sales of INR 16,971 crores in Q3 FY25, with a profit after tax (PAT) of INR 1,470 crores, from INR 1,777 crores in Q3 FY24. Its Q3 FY25 EBITDA was INR 3,131 crores, which is indicative of its bigger size. But UltraTech has a huge debt of nearly $2.02 billion (about Rs 16,700 crore, according to recent reports), which may prove to be a challenge for future growth. Its financials reflect strong revenue growth, but the debt is striking when compared to Ambuja’s debt-free status.
| Metric | Ambuja Cements (Q3 FY25) | UltraTech Cement (Q3 FY25) |
|---|---|---|
| Revenue (INR crores) | 9,329 | 16,971 |
| EBITDA (INR crores) | 1,712 | 3,131 |
| EBITDA Margin (%) | 18.4 | Not specified, ~18.5% (est.) |
| PAT (INR crores) | Not specified | 1,470 |
| Debt Position | Almost debt-free | ~Rs 16,700 crore |
| Cash Reserves (INR crores) | 5,755 | Not specified |
Market Cap
Market capitalization is the aggregate market value of the firms, determined by the number of shares outstanding times the prevailing share price.
For Ambuja Cements, the current share price, as per recent reports, is about INR 469.25 with an estimated outstanding shares of about 2.477 billion, resulting in a market cap of about INR 116,235 crores.
UltraTech Cement, with a price of INR 10,340.80 and 288,192,628 outstanding shares, has a market capitalization of around INR 298,000 crores.
This large gap highlights UltraTech’s greater size, but Ambuja’s lower valuation ratios (explained later) indicate possible undervaluation.
Order Book
In the cement sector, “order book” is not a usual metric since cement is generally sold in the form of distributors or direct sales and not long-term contracts. No such recent reports of companies, such as earnings call transcripts and public filings, state an order book explicitly.
Volume growth and sales outlook reflect future demand instead.
Ambuja delivered 17% year-on-year volume growth in Q3 FY25, while UltraTech registered a 10% year-on-year volume growth in Q3 FY25, indicating both enjoy good demand, though individual order books are not publicly outlined.
Growth Strategy
Both players are going for aggressive growth plans, wherein they are using a mix of organic as well as inorganic expansions.
Ambuja Cements is planning to increase its cement capacity to 140 MTPA by FY28, with considerable inroads through acquisitions such as Orient Cement (to add capacity to 104 MTPA by Q4 FY25) and past acquisitions in Sanghi, Penna, Asian, and Tuticorin.
Its plan involves cost leadership, with a target of reducing costs by INR 530 per ton to INR 3,650-3,700 per ton by FY28 through renewable energy investments (1,000 MW, of which 200 MW have been commissioned in Q3 FY25) and logistics efficiencies. Its growth strategy in the market is premium products and dealer expansion, with blended cement shares of 82% and premium product sales of 26%.
UltraTech Cement’s growth plan is more aggressive, with a goal of 199.6 MTPA in FY27 and the aspiration to be the global leader in cement production with 200 MTPA. It has also sought inorganic growth through acquisitions, including a 55.49% stake in India Cements and an 8.69% stake in Star Cement, expanding its presence in the southern and eastern markets.
Organic growth involves commissioning new capacities, with the plan to increase 15-17 million tons in FY25, and operating efficiencies to sustain cost leadership. Its global reach in UAE, Bahrain, and Sri Lanka also helps in supporting growth.
| Aspect | Ambuja Cements | UltraTech Cement |
|---|---|---|
| Capacity Target | 140 MTPA by FY28 | 200 MTPA by FY27 |
| Key Acquisitions | Orient, Sanghi, Penna, Asian, Tuticorin | India Cements, Star Cement |
| Cost Strategy | Reduce to INR 3,650/ton by FY28 | Focus on operational efficiencies |
| Sustainability | Net zero by 2050, 60% green power by FY28 | Emphasis on low-carbon cement, RMC growth |
Future Outlook
Both of the firms enjoy promising futures due to India’s boom in housing and infrastructure.
Ambuja Cements will benefit strongly from government initiatives for infrastructure, with anticipated cement demand growth at 4-5% in FY25, while cost-saving measures and plans to add capacity are seen pointing towards outperformance. The analysts report scope for earnings growth on stabilizing the assets that it acquired and making the switch to higher margin segments.
UltraTech Cement‘s size, while positive, with expected growth of earnings by 25.2% and revenues by 12.3% a year in line with the recent projections supported by its world’s third-largest and large network of RMC. But the company’s leverage will be limiting, if it gets high by rise in the rate of interest.
Challenges
Ambuja Cements has challenges in the integration of newly acquired assets, handling cost cuts in the face of fluctuating raw material prices, and competition in a saturated market. Environmental laws and transportation costs are other challenges, although its debt-free nature reduces the risk of financial stress.
UltraTech Cement is also battling environmental laws, the effects of climate change (e.g., cyclones impacting operations), and high debt (Rs 16,700 crore), which may burden cash flows during expansion. Competition is stiff, especially with Ambuja’s aggressive forays, and supply chain disruptions are a risk, but its greater size gives it resilience.
Valuation and Investment Verdict
Valuation ratios are essential for making long-term investment choices.
Ambuja Cements is trading at around 34.63 P/E (share price INR 469.25, TTM EPS 13.55), indicating it is relatively undervalued in relation to UltraTech Cement’s P/E of 45.75 (share price INR 10,340.80, TTM EPS 226.00).
Market cap to sales ratios are also comparable, standing at 4.89 for Ambuja (market cap INR 116,235 crores, sales TTM INR 23,788.68 crores) and 4.93 for UltraTech (market cap INR 298,000 crores, sales TTM INR 60,445.55 crores). Nevertheless, Ambuja’s debt-free position (compared to UltraTech’s Rs 16,700 crore of debt) and lower P/E ratio suggest that it is more value-for-money and financially stable for long-term growth.
Both firms distribute dividends, with Ambuja declaring a 100% final dividend in June 2024 and UltraTech distributing Rs 70 per share in July 2024, but long-term investors are concerned with growth and balance sheet strength.
| Metric/Aspect | Ambuja Cements | UltraTech Cement |
|---|---|---|
| P/E Ratio | 34.63 (Share Price: INR 469.25, EPS TTM: INR 13.55) | 45.75 (Share Price: INR 11,544.85, EPS TTM: ~INR 252.25) |
| Market Cap (INR crores) | 116,235 | 333,300 |
| Sales TTM (INR crores) | ~8,415.31 (annualized) | 16,971 (annualized) |
| Market Cap to Sales Ratio | 13.81 (Market Cap: INR 116,235 crores / Sales TTM: INR 8,415.31 crores) | 19.64 (Market Cap: INR 333,300 crores / Sales TTM: INR 16,971 crores) |
| Debt Position | Debt-free (Cash Reserves: INR 5,755 crores as of Dec 31, 2024) | ~INR 16,700 crore |
| Dividend | 100% final dividend announced in June 2024 (INR 2 per share) | INR 70 per share paid in July 2024 |
| Valuation Insight | Lower P/E ratio suggests relatively cheaper valuation | Higher P/E ratio indicates a premium valuation |
| Financial Stability | Debt-free status enhances stability for long-term growth | Significant debt could strain cash flows, posing risks |
| Investment Appeal | Better value with potential upside due to lower valuation and recent acquisitions | Larger scale but higher financial risk due to debt burden |
| Long-Term Verdict | Likely a better long-term investment due to stability and growth potential | Strong growth potential but tempered by higher debt and valuation |
With Ambuja’s lower valuation, debt-free status, and recent acquisitions adding market share, it appears to be a more attractive long-term investment, with potential upside with less financial risk than UltraTech’s greater size but higher debt load.
Conclusion
Studies indicate Ambuja Cements as a better long-term bet based on its lower P/E ratio, debt-free nature, and robust growth strategies despite UltraTech’s bigger size and aggressive goals. Those who seek stability and value would favor Ambuja, while investors who are at ease with the risks from debt may look to UltraTech for growth. The selection is a matter of personal risk tolerance, but Ambuja’s financials make a great case for long-term holding.