UltraTech Cement, the top cement producer in India, recently conducted its earnings conference call for Q3 FY25, which emphasized the company’s financial results, market projections, and strategic plans. The call revealed important insights regarding revenue growth, trends in profitability, operational efficiencies, and upcoming expansion initiatives amid changing industry conditions. This article summarises the main points from the earnings discussion, providing a thorough overview of UltraTech Cement’s performance and its strategy for the upcoming quarters.
Core Business (Grey Cement)
Growth Potential
The country’s development in terms of real estate, infrastructure, and allied sectors ignites the cement demand.
This demand is going to continue till we reach a stage of maturity which is not anywhere in the near term.
For reference, In FY24, per capita consumption of cement in India had reached about 295 kgs. The western was when they peaked in terms of their cement consumption, the cement consumption was somewhere around 600 to 700 kgs per capita before maturing and settling down to a level of about 500 kgs.
Capacity Expansion
At the end of FY25, Ultratech will be at 182.8 million tons of capacity in India, which will be approximately 28% of the industry’s capacity.
By the end of Fiscal ‘27, the company will be at 209 million tons of capacity.
Ultratech is growing faster than the industry organically and inorganically.
Product Portfolio
Ultratech is the largest manufacturers and sellers of Grey Cement in India.
The company has the largest network of RMC(ready mix concrete) in the country. Globally, ready mix concrete is the most common form of cement. However, in India we are still under 5% as RMC and set to grow significantly.
Ultratech is a very strong player in white cement, in fact, Birla White, company’s brand is synonymous with white cement in the country
Building Products Division (BPD)
Several years ago, the company has started its building products division or BPD. Within BPD, the company have already launched multiple products such as mortars, waterproofing agents, AAC blocks, grouting materials, and many others.
Today, Ultratech serves the construction industry with almost 90 SKUs (Stock Keeping Units).
The company examined multiple other adjacencies, pipes, tiles, wood adhesives, sanitary fittings, lights, and fans and rejected all these product categories because they were not a strategic fit.
But Cables and Wires Identified as the only strategic adjacency.
why Cables and Wiress:
- almost 85% of wires market is covered by the residential markets and 65% of cement demand comes from the residential market.
- Residential markets, rural markets, which are highly retail markets, drive about 35% of demand for cement.
- The IHB (Individual Home Builders) in the rural markets, retail market depends on the contractor who deploys masons and electricians. UltraTech has existing relationships with the contractors and can leverage on the same.
- The company has a very strong presence through UltraTech Business Solutions, the company’s UBS Retail Stores, which will provide some head start as compared to any other new player.
- urban housing constitutes about 30% of cement demand. The builder community takes a decision on cement and wires along with the MEP, EPC consultant that they want to deploy.
- UltraTech connects with corporate real estate players alike as well as the EPC players and hence the company thought Cables and Wires should be a very strategic fit and easy to deal with.
- Cables and Wires industry : Industry is going in double digits and expected to grow at a similar pace for a long time. High asset turns, it could range from 5-7x, higher return on capital.