Cement wars: UltraTech's northern expansion puts competitors on margin alert
UltraTech’s fresh 22.8 mt capacity push deepens its hold in the north, but rising competition could intensify pricing pressure and trigger valuation risks for regional peers.
Pan-India focused UltraTech Cement announced the fourth phase of its capacity expansion alongside its September quarter (Q2FY26) results last week. The plan envisages 22.8 million tonnes (mt) of incremental capacity in phases from FY28 onward, with 18 mt in north India and 4.8 mt in the west.
UltraTech will spend ₹10,255 crore on this expansion, largely funded through internal accruals. This implies an enterprise value (EV)/tonne cost of around $52, an attractive level that provides long-term visibility of market share gains, according to ICICI Securities. However, its concentration in the north—the industry’s most profitable region—could stoke a capacity race, the brokerage cautioned in its 20 October note.
Target: 32% market share
Once all phases are complete, UltraTech’s grey cement capacity in the north will rise from 36.3 mtpa (million tonnes per annum) currently to 60 mtpa by March 2028. Its domestic grinding capacity will reach 235.4 mtpa by FY29 from 186.9 mtpa, while clinker capacity will expand to 148 mtpa.
The company aims to lift its market share from about 28% now to 32% in the coming years, maintaining industry-leading volume growth. On a 10-year CAGR basis, UltraTech has seen volume growth of around 12% versus 5% of industry aided by capacity additions. Lately, UltraTech increased exposure in south India via acquisitions.
On the flipside, Ultratech’s hunger for market share would mean more pricing pressure for the sector, keeping realisations growth muted.
According to DAM Capital’s 19 October report, competitive intensity in the northern belt is set to surge as JK Cement and Wonder Cement expand into Jaisalmer (~12 mtpa by FY28), JSW Cement enters the region with ~6 mtpa by FY26–27, and Ambuja Cement is expected to announce a ~5 mtpa capex in Marwar-Mundwa, Rajasthan.
This influx may strain realisations and margins, particularly for north-focused companies such as JK Cement, JK Lakshmi Cement, and Shree Cement, potentially leading to valuation re-ratings, DAM warned.
Stock performance
In CY25 to date, UltraTech’s stock has gained 8%, versus 9% gains in the Nifty50 index. In Q2FY26, higher-than-expected operating costs led to a sharp miss in consolidated Ebitda, prompting earnings cuts for FY26 across brokerages—despite a 7% year-on-year volume growth in what is typically a seasonally weak quarter.
Key near-term triggers include management’s guidance of a ₹100/tonne cost reversal in Q3FY26, a likely price hike in H2FY26, and achieving its 200 mt capacity target by FY26-end.
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