Ambuja sets tough targets to fight competition

The volume growth for Ambuja was driven by ramping-up of existing units, integrating newly acquired capacities—Penna Cement Ltd, My Home Group’s grinding unit, and Sanghi Industries Ltd—and stronger business-to-business (B2B) sales. Organic volume growth came in at 5-5.5%, the management said during the Q2 earnings call. The company expects cement demand to grow by 4-5% in FY25 and accelerate to 8-9% in H2FY25.

For the cement industry, consolidation remains a key trend, with larger players acquiring smaller firms to expand their footprint. Ambuja is aggressively pursuing this strategy, having acquired a 46.8% stake in Orient Cement Ltd last week for ₹8,100 crore from its promoters. The deal, funded through internal accruals, is expected to close within three to four months. Orient Cement has an 8.5 mtpa (million tonnes per annum) capacity, which can nearly double through brownfield expansion. Additionally, its limestone mine in Chittorgarh, Rajasthan, offers scope for an additional 6 mtpa cement capacity in northern India. With this acquisition, Ambuja’s operational capacity will rise to 97.4 mtpa.

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This acquisition will also strengthen Ambuja’s position in the core markets of southern and western India and boost its pan-India market share by 2%. The move aligns with its ambition to reach 118 mtpa capacity by FY26 and 140 mtpa by FY28, aiming to capture 20% market share by FY28, up from the current 15%. However, with high competitive intensity and cement demand yet to show a marked revival, the execution pace and target timelines will be crucial monitorable for investors in Ambuja stock. Analysts at Kotak Institutional Equities note that Ambuja’s organic expansion projects are witnessing marginal delays and should start coming online by FY25-end. A muted demand scenario can delay capacity expansions.

Plus, near-term realizations outlook is not encouraging, mainly due to the sector'sweak pricing trends.

“We have adjusted our revenue and Ebitda estimates downward by 21.1% and 40.2%, respectively, due to decreased realizations/tonne in FY26, attributed to the less favourable trade mix for the acquired assets (Orient Cement: 46%, Penna and Sanghi Cement: the lower end of 50%)," said Nirmal Bang Institutional Equities in a report dated 29 October. The brokerage expects pricing pressure persist through FY26.

To bolster long-term competitiveness, Ambuja aims to raise its share of green power to around 20% by FY25 and 60% by FY28. The company has already achieved cost savings of approximately ₹150 per tonne andis ontrack to achieve total costs per tonne drop of ₹530 by FY28 led by various internal costefficiencies.

The management has set a capital expenditure (capex) budget of ₹7,000 crore for FY25, with ₹3,500 crore spent in H1FY25. Ambuja’s aggressive expansion plans suggest capex intensity will remain high. However, the company’s debt-free status at the consolidated level and its large cash surplus provide comfort, fuelling management’s confidence to fund expansions via internal accruals.

Also read | Is India’s cement sector finally turning a corner?

Meanwhile, Ambuja stock is trading at FY26 EV/Ebitda of 15x, showed Bloomberg data, which is higher than its long-term average. This premium likely reflects investor expectations of robust volume growth and synergies with other Adani Group companies, but it leaves little room for error.