UltraTech Drives Against Industry Traffic

UltraTech Bets Against The Cycle As India's Cement Industry Splits

By Amritha Pillay

What?

India’s cement industry has for long suffered the notorious reputation of moving in lockstep. Not anymore, though. 

As weak pricing and rising fuel costs force several of the country's largest cement makers to moderate expansion plans, UltraTech Cement is taking a contrarian approach. 

The largest company in the sector, UltraTech, is sticking to its investment programme and betting that higher profitability and a stronger balance sheet will allow it to capture market share while rivals prioritise margins.

Industry watchers believe that marks an unusual shift for a sector that has seen years of consolidation. The industry has repeatedly come under the Competition Commission of India's scrutiny over allegations of cartelisation.

Why? 

Now, rather than following the same playbook, India’s cement companies are responding differently to the same market conditions. 

Three of the top four players – Adani Cement, Shree Cement and Dalmia Cement — in their latest analyst calls either indicated a moderation in expansion or adopted a wait-and-watch approach. 

Analysts attribute that caution to the combination of weak cement prices and rising input costs, particularly petcoke and fuel, because of the West Asia conflict.

Until last year, India's largest cement makers mostly shared similar expansion ambitions.

UltraTech targeted 240.76 MTPA by FY28, Adani Group 155 MTPA by 2028, Dalmia Cement 130 MTPA by FY31 and Shree Cement 80 MTPA by FY29.

These numbers appear to have taken a sentimental beating. 

UltraTech, meanwhile, has maintained that "its growth story remains intact." Its broad capex guidance remains Rs 10,000 crore annually over the next four to five years.

Not only has UltraTech been able to turn around and improve operational efficiency for the acquired assets, but “they have a legacy advantage, price premium advantage and economies of scale that allow them to stay highly profitable even without big price hikes,” an industry watcher told The Core. 

The Next Test 

Whether UltraTech Cement’s contrarian strategy persists will depend on how costs and pricing evolve over the coming quarters.

Mumbai-based Antique Limited, a financial services company, said in a June report that average pan-India cement price realisations are expected to remain broadly flat year-on-year, with gains of 2-3% in the North and West, little change in the East and Central regions, and a decline of about 4% in the South.

At the same time, cement makers continue to face rising costs.

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9.87%

That is how much India's wholesale price inflation (WPI) rose in June from 9.68% in May, driven by higher prices of food articles, mineral oils, basic metals, and chemicals and chemical products, government data showed.

Fast Facts: The WPI for all commodities stood at 110.2 in June versus 109.9 in May. Primary articles inflation rose to 7% from 4.99%, with food articles inflation rising to 5.49% from 3.6% and non-food articles to 11.07% from 9.49%.

Fuel and power inflation eased slightly to 27.41% from 30.33%, with mineral oils at 46.48% and crude petroleum and natural gas at 34.75%. Manufactured products inflation held steady at 7.48%, with basic metals at 12.31% and chemicals at 12.78%.

The WPI Food Index rose to 6.14% from 4.49% in May.

By The Numbers: The wholesale inflation data came a day after retail inflation, measured by CPI, rose to 4.38% in June from 3.93% in May, with food inflation under CFPI at 5.32%. April's final WPI inflation was revised upward to 8.36% from a provisional 8.26%.

Hormuz Traffic Falls to a Month-Low

Only 11 ships traversed the Strait of Hormuz on July 12, the lowest since June 14, after attacks hit the container ship GFS Galaxy and the US and Iran made retaliatory strikes, according to an S&P Global Commodities at Sea report.

Background: The 11 ships included one LNG tanker, one general cargo ship, one Suezmax, four product tankers, three landing craft and one bulk carrier. No ships were spotted heading into the Persian Gulf on July 12 for the first time since June 12.

Traffic was down from 32 ships on July 10 and 30 on July 11, with oil, chemical, LPG and LNG tankers making up 48% of the total over July 10–12. Inbound tanker capacity averaged 6.5 million barrels per day over July 1–12, falling to 6 million b/d over July 10–12 from 8.5 million b/d in the first week of July.

Iran-linked and US-sanctioned ships represented nearly 60% of all crossings over July 10–12.

Forecast: While Iran declared the strait closed on July 12, the US Navy-backed Joint Maritime Information Center said the southern route by Oman through Hormuz remained open and had been expanded to facilitate two-way traffic.

Separately, India banned imports of goods made using forced labour, a move that could help avert new US tariffs of up to 12.5% under a probe into forced labour practices. The notification, dated Monday, will come into force after 30 days.

Bond Outlook Stable

For the first time since January 2025, India's retail inflation rose above the Reserve Bank of India's 4% target in June, with the Consumer Price Index (CPI) climbing to 4.4% from 3.9% in May. In a note, Crisil said it expects India's benchmark 10-year government bond yield to remain broadly stable over the coming months as rising inflation risks offset supportive liquidity conditions and strong investor demand.

Outcome: The research firm expects the benchmark 10-year government bond yield to remain in the 6.75-6.85% range through July and September, compared with 6.73% at the end of June. Foreign portfolio inflows, ample liquidity and lower crude oil prices helped bond yields fall last month, while demand from insurance companies and pension funds also supported the market.

Pivot: However, Crisil expects average inflation to be higher this fiscal because of higher energy costs and weather-related pressure on food prices. It also sees the possibility of a 25-basis-point RBI rate hike in the second half of the fiscal year if inflation remains elevated. At the same time, higher government borrowing and expectations of firmer crude oil prices could keep bond yields within a narrow range in the coming months.

HP India Fined Over Bid-Rigging

India's Competition Commission (CCI) has found HP India guilty of rigging bids on the government's electronic procurement platform, ordering the PC maker and 21 resellers to halt the practice and pay penalties totalling $15 million.

Catch Up Quick: The regulator found that HP India told resellers what prices to bid, and manipulated participation, controlling who could win government contracts for personal computers (PCs) and printer supplies from 2017 to 2020.

Five resellers were held liable in the PC case and 16 in the printer supplies case, with several HP India officials and reseller executives facing personal liability.

Setting: HP India itself triggered both investigations through lesser penalty applications, earning reduced penalties for its cooperation. The CCI has directed all parties to undergo compliance training within 60 days.

Beyond The US

India's non-banking finance companies (NBFCs) will likely grow their education loan assets under management (AUM) by around 20% this financial year despite weaker demand for students heading to the US, according to Crisil Ratings.

Lenders have increasingly financed students choosing destinations such as the UK, Germany and Ireland as US policy uncertainty, visa challenges and concerns over post-study work opportunities continue to dampen demand. Last year, The Signal Brief did an episode on the uncertainty that Indian students in the US are feeling too.

Fast Facts: US-linked loan disbursements fell 57% last fiscal, while disbursements to the UK rose 24%. As a result, the US now accounts for 43% of NBFC education loan portfolios, down from 54% a year earlier. NBFCs have also maintained strong asset quality, with overall 90-plus-day delinquencies at just 0.2%.

The Lead: "The ongoing diversification of the destination mix is an important structural development for the sector," said Malvika Bhotika, Director, Crisil Ratings. She added that the shift reduces dependence on a single geography and will remain an important driver of sector growth.

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West Asia Truce Collapses But Impact On Markets Could Be Lesser

On Episode 927 of The Core Report, financial journalist Govindraj Ethiraj talks to Economist Ajit Ranade.

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