UltraTech Cement company analysis

Industry Overview : India is second largest manufacturer of Cement with 139 cement plants, 365 mini plants & 40 players. India’s cement demand is expected to reach 550-600 Million Tonnes Per Annum (MTPA) by 2025.

The Indian cement industry is dominated by a few companies. The top 20 cement companies account for almost 70 per cent of the total cement production of the country. A total of 188 large cement plants together account for 97 per cent of the total installed capacity in the country, with 365 small plants account for the rest. Of these large cement plants, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.
India has a lot of potential for development in the infrastructure and construction sector and the cement sector is expected to largely benefit from it. Some of the recent major government initiatives such as development of 98 smart cities, large Infrastructure projects leading to 45 million tonnes of Cement needed in next three to four levels and expected to provide a major boost to the sector.

To meet the rise in demand, cement companies are expected to add 56 MT capacity over the next three years. The cement capacity in India may register a growth of eight per cent by next year end to 395 MT from the current level of 366 MT. It may increase further to 421 MT by the end of 2017. The country’s per capita consumption stands at around 190 kg.

Expecting such developments in the country and aided by suitable government foreign policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, and Vicat have invested in the country in the recent past. A significant factor which aids the growth of this sector is the ready availability of the raw materials for making cement, such as limestone and coal.

The housing sector is the biggest demand driver of cement, accounting for about 67 per cent of the total consumption in India. The other major consumers of cement include infrastructure at 13 per cent, commercial construction at 11 per cent and industrial construction at 9 per cent.

Company Overview :  UltraTech Cement, India’s largest Cement Manufacturing company amongst the leading producers of cement globally. The company is part of Aditya Birla Group and is a subsidiary of Grasim Limited. UltraTech is also the largest manufacturer of white cement and ready mix concrete (RMC) in India.

It manufactures ordinary portland cement commonly used in dry–lean mixes, general–purpose ready–mixes, and even high strength pre–cast and pre–stressed concrete.

It produces Portland blast furnace that has features like lighter colour, better concrete workability, easier finishability, higher compressive and flexural strength, improved resistance to aggressive chemicals and more consistent plastic and hardened consistency.It also manufactures portland pozzolana cement.

The company has variety of brands under which it sold Cement. They are ‘UltraTech, UltraTech Premium and Birla Super.’ White cement is manufactured under the brand name — ‘Birla White’, ready mix concretes under the name — ‘UltraTech Concrete’ and new age building products under the names — ‘Xtralite, Fixoblock, Seal & Dry and Readiplast’.

UltraTech Cement has 12 composite plants, one white cement plant, one wall care putty plant, one clinkerisation plant in the UAE, 16 grinding units (12 in India, two in the UAE and one each in Bahrain and Bangladesh) and six bulk terminals (five in India and one in Sri Lanka). UltraTech Cement is also India’s largest exporter of cement and clinker reaching out to meet demand in countries around the Indian Ocean and the Middle East. With 100+ Ready Mix Concrete (RMC) plants in 35 cities, UltraTech is the largest manufacturer of concrete in India. It also has a slew of speciality concretes that meet specific needs of discerning customers.

Ultratech cement exports over 2.5 million tonnes per annum which accounts for 30% of country’s total exports. It exports to countries like Africa, Europe and the Middle East.
The company’s subsidiaries are Dakshin Cements Limited, Harish Cements Limited, UltraTech Cement Lanka (Pvt) Ltd and UltraTech Cement Middle East Investments Limited.

UltraTech’s inception can be traced back to the mid-1980s with the establishment of Grasim’s first cement plant at Jawad in Madhya Pradesh. In 2001, with the objective of increasing its reach, Grasim acquired a stake in L&T Cement Ltd. (L&T Cement was incorporated in 24 August 200. It was 100% subsidiary of Larsen and Toubro.) In the year 2004, pursuant to the scheme of arrangement, the cement business of Larsen & Toubro Ltd was de-merged and got transferred to the company with effect from April 1, 2003. In May 14, 2004, the company acquired four crore equity shares of Larsen & Toubro Ceylino (Pvt) Ltd from Larsen & Toubro Ltd at an aggregate consideration of Rs 23.03 crore.

In July 2004, Grasim Industries Ltd acquired management control of the company and in October 14, 2004, the name of the company was changed from UltraTech ChemCo Ltd to UltraTech Cement Ltd. Also, Narmada Cement Company Ltd became a subsidiary of the company by virtue of the scheme of arrangement for de-merger of cement business of Larsen & Toubro Ltd.

The stake was further increased to a majority stake in 2003 thereby giving Grasim a pan-India presence and an increased market share. In 2004, the demerger of L&T’s cement business was completed and Grasim acquired a controlling stake in L&T Cement Ltd and the name was subsequently changed to UltraTech Cement. The cement business of Grasim was demerged and vested in Samruddhi Cement Limited in May 2010, with Samruddhi Cement Limited consequently being amalgamated with UltraTech Cement Limited in July 2010. In September 2010, UltraTech Cement Middle East Investments Limited, a wholly owned subsidiary of UltraTech Cement acquired management control of ETA Star Cement Company, along with its operations in the UAE, Bahrain and Bangladesh, thereby putting UltraTech on the global map.

SHAREHOLDING

Financials and Ratio’s :

 2010-112011-122012-132013-142014-152015-16
Revenue13468.0320433.0920484.9620608.8523307.9524342.52
Net Profit1404.232446.192655.432144.472014.732174.65
Net Profit Margin10.5413.3513.1510.578.789.02
Book Value389.21469.22555.65623.45687.23755.61
EPS62.7289.2296.8578.1873.3979.20
ROE13.1619.0217.4312.5410.6810.48
ROCE9.4713.3112.548.927.628.16
ROA7.0210.669.687.205.725.74
Dividend per Share689999.5
Dividend Payout11.708.969.2911.5012.2611.98
Debt to Equity0.250.300.290.280.350.23
Asset Turnover66.5879.8173.6268.1565.1363.68
 

Future Prospects : Though there is big potential for Cement companies in India as new Govt is taking Infrastructure development as it’s important task, but the companies are mait unfair by making cartel and increasing the price. Telangana holding big potential for the companies as the state need to building whole new Infrastructure including new Capital.

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About Ashutosh Tilak

Tracking Indian Capital Market since 2010. Finance Student, On this blog I am writing about finance and Investing. You can contact me analystashu@gmail.com or @androidashu & @InsideFinanc on twitter