Ultratech- The Dark Horse of the Race

The
biggest
cement company
of India and the
largest exporter
of cement clinkers
has been the dark
horse of the race
on the Street.
UltraTech is the
part of Aditya
Birla group and an
extension
of
Grasim Industries.
The company had
been feared for
its fast acquisitions and in July, it was restricted by the Competition Commission of India from going
after the Lafarge assets. Lafarges 11mtpa India asset was bagged by the most unlikely firm, Nirma. Had
Ultratech been able to bag Lafarges assets, its capacity would have crossed 100 mtpa mark that
currently stands at 91.1 mtpa.

The Lead:
From being a small player, UltraTech has constantly added value to its business by adding capacities,
entering new regions and aggressive acquisitions. Its capacity has grown fourfold in a decade, from 15.5
mtpa in 2004-05 to 66.2 mtpa in 2016-16, at a CAGR of 14.1%. Competition Commission of India has
approved the acquisition of Jaiprakash Groups 21.1 mt of cement assets by UltraTech. This approval by
CCI has catapulted the cement giant way ahead of its all competitors, especially LafargeHolicim, its USbased closest competitor. LafargeHolicim controls ACC and Ambuja Cements in India.

Apart from its capacity, the companys earning has also grown at a Compound Annual Growth Rate of
25.6%. In almost a decade, Ultratech Cement share price has also gone up by 17.5%. But last three to
four years have provided the Dark Horse the lead over its large peers.

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Race to the top:

Excluding the 11 mt capacity of Lafarge India, the consolidated capacities of ACC and Ambuja Cements
remain at 58-60 mt since the Calendar Year 2011. ACC and Ambuja were waiting for the restructuring
nod that came in 2013. Both the companies have not seen significant capacity addition since Calendar
year 2011.

Last month, ACC announced the commissioning of a 2.8 mt unit in Chhattisgarh, but the expansion work
had started before the announcement of restructuring. On the other hand, Ultratech had emerged as
Indias largest cement entity with 19 new expansion projects and inorganic growth. With the acquisition
of JP cement, Ultratechs capacity has zoomed up to 91.1 mtpa. The company is likely to exceed Industry
growth in this financial year. However, LafargeHolicim will also seek fuel after its global restructuring
that is expected to be completed in a few quarters.

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Conclusion:
The proposed restructuring of both ACC and Ambuja Cements have just been approved by the
Government. The Street is looking at the restructuring in a positive light. These transactions would
enable the group to create a linear corporate structure. The restructuring is expected to produce the
Synergy potential of Rs. 900 crores from the Indian Operations. With so much going on, will UltraTech
be able to sustain its lead?

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Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways are
solely the personal views of the research team. Users are advised to use the data for the purpose of
information and rely on their own judgment while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022
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