UltraTech Cement Limited — Q2 FY25 earnings call

Call held 23 Jan 2025

Management summary

UltraTech delivered a strong Q3 FY25 with 10% volume growth, significantly outpacing the industry at ~5%. EBITDA per ton jumped over 30% QoQ to ₹964, driven by improving realizations and lower fuel costs. The quarter was transformative on the inorganic front — India Cements open offer concluded with an EV of ~$97-98/ton, and a strategic 8.42% stake in Star Cement was acquired for ₹776 crores to deepen Northeast presence.

Highlights

  • Volume growth of 10% YoY, outperforming industry growth of ~5%

  • EBITDA per ton of ₹964, up more than 30% over Q2 FY25

  • Realization improved 1.4% QoQ; North and West saw >3% price improvement

  • India Cements open offer concluded at ₹390/share; 81.49% equity held; EV at ~$97-98/ton

  • Star Cement: 8.42% stake acquired at ₹776 crores

  • Consolidated net debt at ₹16,160 crores post India Cements open offer

  • Capacity target of 185 MTPA at FY25 end including acquisitions

  • Fuel cost down to ₹1.76/kcal from ₹1.84/kcal; pet coke mix at 58%

Key financials

  1. EBITDA/Ton ₹964 +30%QoQ
  2. Volume Growth 10%
  3. Fuel Cost ₹1.76/kcal -4.3%QoQ
  4. Clinker Conversion 1.45×
  5. Lead Distance 377 km
  6. Capacity Utilization 76%

What they filed

Q1 FY27: revenue up 15.9%, net profit up 17.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue16,294 17,779 23,063 21,275 19,607 +20%21,830 +23%25,799 +12%24,648 +16%
EBITDA2,026 2,893 4,608 4,406 3,089 +52%3,911 +35%5,599 +22%5,015 +14%
Net profit708 1,363 2,475 2,221 1,238 +75%1,729 +27%3,000 +21%2,604 +17%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Capacity

  • Total Capacity FY25 End Capacity · FY25 · High confidence 185 MTPA
    We target closing this year at 185 million tons of capacity. This includes the two acquisitions of Kesoram as well as India Cements.

    — Atul Daga, CFO

  • Organic Capacity Addition FY26 Capacity · FY26 · High confidence 10-15 MTPA
    Work is in full swing for adding additional 10 million tons to 15 million tons of organic capacity in the year 2026. This will take us to 211-212 million tons.

    — Atul Daga, CFO

  • WHRS Capacity Capacity · FY27 · High confidence 511 MW

    Previously 450 MW → 511 MW

    This target will go up to 511 megawatts of capacity, taking into account the additional WHRS expansion which will be done at India Cements and Kesoram.

    — Atul Daga, CFO

  • Renewable Energy Capacity Capacity · FY27 · High confidence ~2.1 GW

    Previously 1.8 GW → ~2.1 GW

    This target is now standing at upwards of 2 gigawatts, about 2.1 gigawatts is what we are looking at to complete.

    — Atul Daga, CFO

Volume

  • Volume Growth FY26 Volume · FY26 · High confidence Double-digit growth
    We would look at a double-digit growth next year on our expanded availability.

    — Atul Daga, CFO

  • Capacity Utilization Target Volume · FY26 · High confidence 80-85%
    I would assume a capacity utilization of anywhere around 80% to 85%.

    — Atul Daga, CFO

Capex

  • Capex FY26 Capex · FY26 · High confidence ₹9,000 crores

    From ₹8,000-9,000 crores today

    26 will be around Rs. 9,000 crores, and 27 will taper down, maybe Rs. 6,000 crores, Rs. 7,000 crores to complete our expansion program.

    — Atul Daga, CFO

  • Capex FY27 Capex · FY27 · Medium confidence ₹6,000-7,000 crores
    27 will taper down, maybe Rs. 6,000 crores, Rs. 7,000 crores to complete our expansion program.

    — Atul Daga, CFO

Cost

  • Fuel Cost Near-term Cost · Near-term · Medium confidence ₹1.7/kcal
    We expect our fuel costs to be around 1.7 kcal in the near future.

    — Atul Daga, CFO

Margin

  • India Cements Turnaround Margin · By Jan 2026 · High confidence 12 months
    Our focus is to turn around the performance of ICL in less than 12 months starting January 25.

    — Atul Daga, CFO

Risks & concerns

  • State-level mineral taxes post Supreme Court judgment allowing states to levy taxes on limestone

    medium

    Impact limited to Chhattisgarh and Rajasthan for UltraTech; Tamil Nadu and Karnataka planning new taxes. Central government considering intervention.

    Analyst acknowledged

  • South India pricing pressure from new capacity additions (Penna, India Cements ramp-up, Kesoram)

    medium

    CFO's response was 'If demand picks up my guess is prices will also improve' — somewhat dismissive of competitive concern.

    Analyst downplayed

  • Pet coke price volatility and fuel mix constraints

    low

    Company cannot do 100% pet coke due to scale; prices volatile — went up $4 in 2 days. Blended fuel cost will stay above pure pet coke levels.

    Management acknowledged

Areas of evasion (2)

  • India Cements detailed CAPEX plans — asked for one more quarter
  • Sanghi Cement comparison — deflected with irritation

Q&A highlights

3 direct
India Cements turnaround timeline and rebranding strategy Direct
We are looking at least 12 months to turn around the performance of India Cements assets. Not the same profitability, maybe Rs. 200-Rs. 300 lower.

Sets clear expectations for ICL integration — turnaround within 12 months but EBITDA/ton still ₹200-300 below UltraTech level

Asked by Pulkit Patni, Goldman Sachs

Consolidated net debt and India Cements EV Direct
Rs. 16,160 crores at the end of open offer. India Cements net debt was Rs. 877 crores... EV is about Rs. 12,075 crores for 14.45 million tons.

Reveals India Cements acquisition at ~$97-98/ton EV — significantly cheaper than market expectations of $120/ton

Asked by Prateek Kumar, Jefferies

Lead distance reduction and efficiency gains Direct
We would look at this number dropping down further 5%-6%... 23 kilometers is almost Rs. 70 benefit.

Quantifies the logistics savings and confirms further lead distance reduction expected from network density improvements

Asked by Bhavin Chheda, Enam Holdings

2 min read 5 chapters

Detailed narrative

India Cements Acquisition: Below-Market EV Creates Value Opportunity

The India Cements open offer concluded with 110% subscription at ₹390/share, giving UltraTech 81.49% equity. The EV works out to ₹12,075 crores for 14.45 MTPA capacity at ~$97-98/ton — well below the market assumption of $120/ton. Net debt in ICL as of Dec-24 was only ₹877 crores, and non-core asset monetization will reduce it further. Management targets turning around ICL performance within 12 months.

Demand Recovery Led by Infrastructure Push

After a subdued first 8 months of FY25, demand picked up in December. Central government capex was down ~12% in Apr-Nov 24, but is expected to improve from January 25 onwards. Rural markets are supported by good monsoons and harvest. UltraTech grew volumes 10% vs industry's ~5%, maintaining its outperformance streak.

Southern Market Consolidation: From 20 to 60 MTPA Capacity

Through India Cements (13 MT in South) and Kesoram acquisitions, UltraTech has tripled its South capacity from 20 to ~60 MTPA, capturing nearly 30% capacity share. India Cements was operating at only 57% utilization, presenting significant upside. Brand transition will be gradual — a ₹20-25/bag realization gap exists between UltraTech and India Cements brands.

Efficiency Programs on Track with Measurable Gains

Clinker conversion ratio improved to 1.45x from 1.44x in Q4 FY24. Lead distance reduced to 377 km from 400 km at program start, delivering ~₹70/ton savings. WHRS capacity reached 324 MW (from 278 MW), and renewable energy at 752 MW (from 612 MW). Fuel cost dropped to ₹1.76/kcal from ₹1.84/kcal with higher pet coke share at 58%.

Capacity Expansion Roadmap: 211-212 MTPA by End of Growth Program

UltraTech targets 185 MTPA by FY25-end and plans to add 10-15 MTPA organically in FY26, reaching 211-212 MTPA. WHRS target has been revised upward to 511 MW (from 450 MW) and renewable energy to ~2.1 GW (from 1.8 GW) to incorporate India Cements and Kesoram requirements. Capex of ₹9,000 crores planned for FY26 and ₹6,000-7,000 crores for FY27.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Construction Materials earnings calls