Cement capacity race with Birla group may ease as Adani shifts focus to margins

Ambuja Cements Ltd, which was acquired by the Ahmedabad-based conglomerate in September 2022, told analysts at a plant visit last week that it will not rush into expansions at the expense of margins. The company was open to pushing back its FY28-end target of achieving 155 million tonnes per annum (mtpa) capacity by a couple of years as it looks to increase the utilization of its existing capacity.

Currently, it is the second-largest cement maker in India with 109 mtpa of capacity.The rivalry between the Adani Group and the Aditya Birla Group’s UltraTech Cement Ltd has resulted in rapid manufacturing capacity expansion. In the last three-and-a-half years, the two conglomerates have added nearly 120 mtpa of cement manufacturing capacity between them, about a third of which was through organic expansion and the rest through the acquisition of half a dozen smaller players.

For context, the capacity they added is more than the total capacity of the next two players combined.UltraTech Cement has 189 mtpa domestic capacity at present, and 194 mtpa total including international operations.The expansion spree of the top two players prompted other companies also to increase their manufacturing footprint or risk being completely priced out by the efficiencies of scale that the two behemoths were building.While India’s cement demand has also grown over this period, the rapid expansion meant that plant utilization rates remained sub-optimal. Meanwhile, competition for market share further drove down prices, benefitting cement user industries but crimping the margins of cement manufacturers.India’s cement capacity went up from about 568 mtpa at the end of FY22 to 668 mtpa at the end of FY25, as per Crisil.