UltraTech Cement to Raise ₹3,000 Crore via NCDs to Stay Ahead in the Game

UltraTech Cement to Raise ₹3,000 Crore via NCDs to Stay Ahead in the Game

UltraTech Cement, the flagship company of the Aditya Birla Group, has decided to raise ₹3,000 crore through non-convertible debentures (NCDs) to bolster its financial standing amid growing competition in the cement sector. The company’s finance committee has given the green light for issuing these rupee-denominated, unsecured, redeemable, and listed NCDs in one or more tranches via private placement.

Why This Move Matters

The cement giant isn’t just looking to raise funds; it’s gearing up for what seems like an intense market battle. Competitors, including the rapidly expanding Adani Group, are making moves to grab a bigger slice of the market. UltraTech, with this financial boost, seems to be positioning itself for strategic investments and operational enhancements.

Stock Market Performance: Outshining the Nifty 50

Despite a challenging year financially, UltraTech’s stock has had a stellar run. Over the past year, the stock has risen by over 22% to ₹10,720, surpassing the NSE Nifty 50’s growth of less than 20%. This rise has pushed the company’s market cap close to ₹3.1 lakh crore, reflecting investor confidence even amidst short-term pressures.

A Bumpy Q2 FY2025 Ride

However, UltraTech’s Q2 financials tell a different story. The company posted a 36% drop in net profit, clocking in at ₹825 crore—well below analyst expectations of ₹939 crore. Revenue dipped 2% year-on-year to ₹15,635 crore, and EBITDA margins took a steep fall of 300 basis points to 12.9%.

One key concern has been the company’s growing debt. As of September 2024, UltraTech’s consolidated net debt had ballooned to ₹8,793 crore, a stark jump from ₹2,779 crore in March 2024. Yet, amidst these challenges, UltraTech did report a 3% rise in domestic sales volumes, thanks to robust demand and a 14% drop in energy costs, which partly offset rising raw material expenses.

Strategic Moves: Consolidating Market Share

UltraTech isn’t sitting idle. Earlier this year, it made a significant investment of ₹3,954 crore to acquire a 32.7% stake in India Cements, strengthening its presence in South India—a region heating up with competition from Adani. To put it in perspective, UltraTech now holds 11% of the market share in South India, compared to Adani’s 6%.

This isn’t the first bold move from UltraTech. The company has a history of strategic acquisitions, including deals with Kesoram Industries, all aimed at retaining its market leadership.

Betting on Sustainability

In addition to market expansion, UltraTech is pushing hard on sustainability. It recently raised $500 million through a sustainability-linked loan, marking its second such initiative after a similar green bond issuance in 2021. These moves highlight the company’s commitment to eco-friendly operations while setting the stage for 7-8% sustainable volume growth.

Government infrastructure projects and rising demand for urban housing are likely to fuel this growth. Imagine India’s bustling metro cities like Bengaluru and Mumbai, where infrastructure developments—from highways to high-rise apartments—are driving the need for high-quality cement.

Looking Ahead

UltraTech is balancing near-term financial pressures with long-term growth strategies. By raising ₹3,000 crore through NCDs, the company is ensuring it has the financial muscle to outpace rivals, invest strategically, and keep building for India’s growing infrastructure needs. As UltraTech fortifies its position, the cement industry may witness more bold moves and intense competition in the days to come.