India Cement Industry Shift! UltraTech Expansion Explained | Govindraj Ethiraj

ELI5/TLDR

UltraTech just hit 200 million tonnes of cement capacity — second only to the Chinese giants and the largest outside China. The first 100 million tonnes took 36 years; the second 100 million took less than seven, mostly through bolt-on acquisitions of stressed and idle plants. CRISIL’s Anand Kulkarni walks through what this means for an industry where economics are fundamentally regional (cement doesn’t travel well), and why even with another 115-125 million tonnes of capacity coming, utilisation should stay in a comfortable band. The rest of the show: foreign brokerages downgrading India, Reliance refining hit by Iran-war supply disruption, fiscal deficit math under pressure, and the EV market splitting into a luxury segment that’s growing and a sub-10 lakh segment that’s actually shrinking.

The Full Story

UltraTech’s 200 million tonne milestone

The headline number lands with the commissioning of three new grinding units totalling 8.7 million tonnes — placed in Uttar Pradesh, Jharkhand and Andhra Pradesh. Those locations aren’t accidental. They cover the North India construction corridor, the Jharkhand industrial belt, and the urbanising Andhra coast. UltraTech is now on track to 240 million tonnes.

The compression of the timeline is the real story:

Ultratech says it took 36 years to reach 100 million tons in 2019 whereas the next 100 million tons took less than 7 years.

Most of that second 100 million did not come from greenfield builds. It came from picking up stressed assets — defunct mines, idle plants, weaker balance sheets — and turning them on with incremental capex.

Why cement is a regional game

Kulkarni’s framing is the most useful piece of the conversation. Cement is heavy, low-value-per-tonne, and economically untransportable beyond a certain radius. So scale doesn’t mean what it means in, say, autos or telecom.

It’s not just about being big, it’s about being big in right regions.

Total Indian capacity sits around 720-730 million tonnes as of March 2026. The South holds roughly 30-32% of it because that’s where the limestone is. East has 22%, North 18-20%, with Central and West smaller. But demand doesn’t track supply — the West has a higher demand share than capacity share, the South the reverse. The arbitrage happens at the borders, where a southern plant can serve a western market.

Inputs scale matters too. Pet coke, power, distribution networks — all get cheaper per tonne when you’re large. And geographic diversification lets a pan-India player absorb a regional demand or supply shock without it showing up in consolidated numbers.

But — and this is the part worth holding onto — Kulkarni explicitly refuses to call it a winner-take-all industry:

It’s not really a level beyond which you become viable in this industry just that maybe a profitability level will be slightly different.

A 10-15 million tonne regional player can run economically. The big guys just earn a higher margin.

The consolidation wave

Two drivers, per Kulkarni. First, the cement industry had a down-cycle in 2025. Smaller and over-leveraged players couldn’t sustain economics, and the strong balance sheets came shopping. Second, a meaningful pool of capacity was simply idle — defunct mines, stranded grinding units — and the consolidators bought them, spent a small amount of integration capex, and brought them on stream.

The number to remember: about 11% of India’s installed cement capacity changed hands in the last two years. Kulkarni says that’s the highest ever for a two-year block.

This has compositional implications. The acquirable inventory of stressed and idle assets is now thin. Future growth has to come from greenfield and brownfield, which is exactly what’s being announced.

Capacity vs demand: the next two years

CRISIL’s outlook:

115-125 million tonnes of new capacity over roughly two years
75-80 million tonnes of incremental demand
Implied utilisation on the new tranche: ~65%

That sounds tight, but Kulkarni argues it’s fine. Cement capacity comes in chunky blocks — a single plant commissioning can be 5+ million tonnes — so utilisation dips on commissioning and ramps as demand fills it. Current industry utilisation is 68-69%, slightly below recent quarters. The decade average is around 65%. Anything above 65% is comfortable.

Demand is split across infrastructure (doing fine), rural housing (decent, monsoon-sensitive), urban housing (sluggish), and commercial/industrial. Mid-single-digit volume growth is the base case.

The global player question

A small but interesting aside. Govindraj asks about international cement majors. Kulkarni’s answer is blunt: there is no global play here. Cement can’t be imported or exported meaningfully, so foreign players have to build local, hire local, follow Indian land and limestone regulation, and partner with Indian counterparts. The industry is structurally domestic.

What’s around the cement story

The episode opens grimmer than the cement segment suggests. JP Morgan downgraded Indian equities to neutral; HSBC went underweight. The Sensex is down ~10% YTD, underperforming most EMs. The rupee REER is at 92.72 against a long-run average of 98.25 — a decade low — and the rupee touched 95.21 to the dollar in late March. Brent is at $105, WTI at $94. The Iran war, now entering its ninth week against an original four-to-six-week expectation, is the proximate cause for most of this.

Reliance missed Q4 expectations. Refining EBITDA fell 3.7% YoY because Middle East feedstock supply is in what an executive called an “unprecedented crunch” — the company is now substituting up to half its feedstock from Russia, Venezuela and Brazil. Reliance is down 13% YTD, double the Nifty’s loss.

Ashok Khachara, editorial director at Business Standard, makes a tight argument on the fiscal deficit. The 4.3% target for FY27 is no longer credible given oil shock and likely fertiliser subsidy overruns (the budgeted ₹1.7 lakh crore probably needs to be ₹2.5 lakh crore). His point is less about the actual number and more about the messaging — markets, the RBI, and the states all need a revised, explicit deficit number to coordinate around. He compares the moment to early COVID, when the deficit went from 3.6% to 9.2% in a single year. The government, he notes, is in a holding pattern until the state assembly elections finish; under-recovery on petrol is roughly ₹20/litre and on diesel close to ₹100/litre, and that pass-through can’t be deferred forever.

The EV segment is a quick one but worth flagging. EV penetration in cars priced above ₹12 lakh is around 10%. In the sub-₹12 lakh segment — where 3 million of India’s 4.2 million PVs are sold — penetration is 1.5%. The 20-30 lakh segment grew its share from 24% to 35% YoY. The under-10 lakh segment shrank from 7.2% to 6%. Without a viable mass-market sub-10 lakh EV product, the bottom of the market stays petrol.

Key Takeaways

UltraTech: 200 MT now, 240 MT runway, second only to Chinese majors globally
First 100 MT took 36 years, second 100 MT took under 7 — heavily M&A-driven
11% of Indian cement capacity changed hands in 2024-25, highest two-year block ever
Total industry capacity: ~720-730 MT (March 2026); current utilisation 68-69%
Regional supply distribution: South 30-32%, East 22%, North 18-20%, Central+West smaller
Cement is structurally regional — high freight cost, no global plays, no meaningful imports/exports
Smaller players (10-20 MT) remain economically viable; consolidation is about margin, not survival
Next 2 years: 115-125 MT new capacity vs 75-80 MT incremental demand; utilisation stays ~65%
Down-cycle in 2025 was a key consolidation trigger; acquirable inventory is now mostly absorbed
Macro backdrop: India downgraded by JPM and HSBC, rupee REER at decade low (92.72), Reliance refining hit by Iran war feedstock crunch
Fiscal deficit target of 4.3% likely needs upward revision; fertiliser subsidy may overshoot by ~50%
EV affordability divide widening — sub-10 lakh segment shrinking even as overall EV volumes grew 87% YoY

Claude’s Take

This is really two segments stitched together — a tight industry primer on cement plus the usual Core Report macro roundup — and the cement piece is the better one. Kulkarni is the kind of analyst who refuses to over-claim. When Govindraj sets up the obvious question (does India need more big players?), he doesn’t take the bait. The honest answer is that scale changes profitability, not viability, and that for a regional commodity that’s the right framing.

The 11% turnover number is the fact to keep. It quantifies what most observers have felt anecdotally — that the Adani-UltraTech rivalry, the Holcim exit, the Sanghi acquisition, the Penna deal, the smaller stressed-asset buys all add up to a one-decade-in-two-years restructuring. The implication that future growth has to be greenfield/brownfield because the inventory of stressed assets is thin is the forward-looking part most coverage misses.

The macro context the episode sits inside is more important than the show treats it. If JPM and HSBC are downgrading at the same time the rupee REER prints a decade low and Reliance refining is being substituted with Russian and Venezuelan crude, the cement demand projections are sitting on a softer base than CRISIL’s mid-single-digit assumption suggests. Infrastructure spend is government-driven and probably holds; rural housing depends on the monsoon; urban housing is already sluggish. Score: 7. Solid industry segment, useful numbers, but the show doesn’t quite connect its own dots between the macro pain in the first half and the cement demand assumptions in the second.

India Cement Industry Shift! UltraTech Expansion Explained | Govindraj Ethiraj | The Core Report