Ambuja Cements, which has been on a mergers and acquisitions spree, appears to be taking a leaf out of rival Shree Cement’s playbook.
Analysts who recently visited the company’s Sanghipuram plant in Gujarat said the management indicated a shift toward a value-over-volume strategy, prioritising margin-accretive growth rather than rapid capacity additions that risk running at low utilization levels.
The Sanghi Industries plant, acquired by Ambuja in December 2023, now accounts for about 6% of the company’s current capacity.
Capacity discipline
Ambuja expects to meet its interim capacity addition target of 117 million tonnes per annum (mtpa) over the next three to four months. However, further expansion toward the 155 mtpa target will be pursued only after utilization improves to 80-85%.
At present, utilization stands at 70%, based on an installed capacity of 109 mtpa.
While capacity additions have helped boost Ambuja’s market share and expand its pan-India presence, lower utilization levels have weighed on profitability. Analysts believe that once the strategy begins to yield results, return ratios and margins could improve.
A slowdown in capacity additions across the sector could also help ease demand-supply imbalances, potentially lending support to cement prices.
Shree Cement had earlier adopted a similar value-over-volume approach to bridge pricing gaps with competitors—a strategy that has begun to show results.
However, the move came at a time when the industry was consolidating and peers were pursuing volume-led growth through aggressive expansions. As a result, Shree Cement lost market share, and despite some cost advantages, muted cement prices weighed on its realizations.
Premium push
Ambuja believes consolidation in the sector has not yet delivered the expected pricing discipline.
Instead, the company plans to rely on cost efficiencies and premiumization to drive margin expansion.
Management expects revenue growth to outpace volume growth as the share of premium products rises. Premium cement accounted for 35% of trade sales in Q3FY26.
Production of Ambuja Gold and Ambuja Kavach, two premium offerings, has already started. These products command a premium of ₹55 per bag over standard cement.
Cost control
To strengthen its cost structure, Ambuja is ramping up operations at acquired units, including the Sanghipuram facility.
Clinker costs at the plant have already declined to around ₹2,000 per tonne, compared with ₹2,400–2,500 per tonne at the time of acquisition. The company aims to bring this cost below ₹1,500 per tonne.
The plant benefits from lignite availability, which provides a cost advantage of around 5-7% as captive power plants can run entirely on lignite.
Overall, Ambuja is targeting cost reductions of around ₹3,800 per tonne by FY27 and ₹3,650 per tonne by FY28.
Ambuja’s stock is down 19% so far in 2026 and currently trades at an estimated FY27 EV/Ebitda multiple of 13x, according to Bloomberg data. This represents a discount to peers UltraTech Cement and Shree Cement.
However, weak cement prices and rising costs of key inputs such as petroleum coke and coal continue to weigh on investor sentiment.