UltraTech Cement surges 4%, hits record high on Rs 5,477 crore capex plan

Workers walk in front of an UltraTech concrete mixture truck at the construction site of a commercial complex on the outskirts of Ahmedabad | Photo: Reuters
Shares of UltraTech Cement surged 4 per cent to hit a fresh record high in the early morning trade on the BSE on Friday. The stock crossed Rs 5,000 mark to scale the peak of Rs 5,104 after the company said its board has approved increasing the firm's capacity by 12.8 mtpa (MT), with a mix of brown field and green field expansion at a capex of Rs 5,477 crore. The company surpassed its previous high of Rs 4,998, touched on December 2, 2020.

The additional capacity will be created in the fast-growing markets of the east, central and north regions in the country, UltraTech Cement said in a press release. This capacity addition will not impact the ongoing deleveraging program which is on track to make UltraTech debt-free by the time the expansion program is completed, it added.

The management said the cement industry has been witnessing healthy volumes post relaxation of lockdown, on the back of the government’s thrust on infrastructure, underlying demand from the rural economy and individual home builders.

The newly announced capacities of 12.8 MT are coming at a capex of <$60/t, which is below industry replacement cost of $100- 110/t as 72 per cent of capacity being brownfield, ICICI Securities said in a note.

"Further, new capacities would improve reach and network that is likely to aid reduction in the lead distance as well. With these expansions, UltraTech’s total capacity would reach nearly 131 MT by FY23E with a long term plan to be at 160 MT. Deployment of strong operating cash towards capacity expansion along with deleveraging would continue to improve return ratios," the brokerage firm added.

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