Construction Industry News
UltraTech Cement will expand its presence in South India and enter a new state by acquiring the cement business of Kesoram Industries. This move is expected to increase UltraTech's presence in the region without significantly altering pricing discipline, although an increase in production volume is expected.
On November 30, Kesoram Industries announced the demerger of its cement business and transferred it to UltraTech Cement through a share exchange agreement. As of September, UltraTech Cement was operating at a capacity of 20.5 million tonnes per annum (mtpa) in south India, making it the smallest pan-India market in its portfolio. This dynamic is about to change with acquisitions and strategic expansions.
The deal with Kesoram Industries is expected to provide 10.75 million tonnes of additional capacity for UltraTech Cement, including two integrated cement units at Sedam (Karnataka) and Basantnagar (Telangana). Notably, this transaction marks the entry of UltraTech Cement into the Telangana market, further strengthening its position as the largest cement manufacturer in the country.
Vincent KA, research analyst at Geojit Financial Services, noted that despite Kesoram's current capacity utilization of 65%, UltraTech's pan-India presence is expected to optimize utilization without causing significant disruptions to the manufacturing discipline. supply and prices in the southern region.
Kesoram's cement assets also include a 0.66 tonne per annum packaging plant in Solapur, Maharashtra.
The South Indian market is distinguished by the highest overcapacity and fragmentation within India. However, the region has maintained price discipline and avoided price wars among cement producers. Analysts such as Geojit's Vincent KA see consolidation through acquisitions of existing assets as beneficial for market price discipline.
Anticipating higher volumes, analysts expect more products to be shipped from Karnataka to Maharashtra, which could impact prices, although the magnitude of the impact remains uncertain.
Apart from the deal with Kesoram, UltraTech plans to add another 15 million tonnes per annum to the South market through expansions planned for FY27. Analysts predict that with these expansions and the acquisition, South India is likely to overtake Western India as UltraTech's leading market in terms of capacity. Currently, South India has the largest capacity at the sectoral level, totaling 180 tonnes per annum compared to other regional markets in West, East, Central and North India.
