Cement majors commit big money to capex, signalling infra revival

Indicating a revival in private sector sentiments, particularly in infrastructure, top cement companies have announced one of the largest investments in recent times to enhance capacity and improve operational efficiency.

While UltraTech Cement, an Aditya Birla Group company, on Thursday announced an investment of ₹5,477 crore to expand its capacity, Ambuja Cement and ACC, part of the LafargeHolcim Group, said they will pump in ₹780 crore to set up six waste heat recovery systems.

Shiva Cement, a subsidiary of JSW Cement, is investing over ₹1,500 crore in a 1.36-mt clinker unit in Odisha.

This comes even as industry analysts expect cement volumes to grow 12 per cent year-on-year (YoY) during the second half of the ongoing fiscal compared with a 6 per cent contraction in the first half. Large producers, including UltraTech, ACC and Ambuja Cements, reported higher YoY volumes in the second quarter of FY21 as activity in urban housing, infrastructure and commercial construction picked up pace.

UltraTech will use the investment to expand its capacity by 12.8 mt per annum by FY23. This marks the company’s largest investment ever, in a mix of brownfield and greenfield expansion.

“This significant investment in a core infrastructure sector will accelerate the wheels of economic activity and aid the kickstart of the private investment cycle,” said Kumar Mangalam Birla, Chairman, Aditya Birla Group.

“The cement industry has been witnessing healthy volumes post relaxation of lockdown.”

Ambuja Cement and ACC are setting up six waste heat recovery systems of 76 MW at eight kiln lines across six cement plants in 16-18 months. This will trim its carbon footprint by 5.61 lakh tonnes annually.

Revival of capex cycle

Binod Modi, Head - Strategy, Reliance Securities, said the capex cycle in the cement industry has revived on the back of a significant fall in replacement cost and sustained buoyant demand in North, East and Central India. The cost of equipment and machinery for setting up cement plants has fallen significantly with a slump in global demand barring India, he said.