WHEN K.C. JHANWAR took over as managing director of UltraTech Cement on January 1, 2020, the pandemic was taking the shape of a storm, ready to topple economies across the world. As the company was cutting down on production and its capital expenditure budget, Jhanwar, a chartered accountant by profession, was busy charting out the action plan for a long-term sustainable cash flow by accelerating innovation, digitisation and sustainability. To ensure he did not cede ground to rivals, Jhanwar also increased capacity, convinced that an economic bounce back was in the offing.

Once the first wave started receding in December 2020, UltraTech announced an investment of ₹5,477 crore. Production increased rapidly from next year as the world slowly moved back to normalcy. By FY23, grey cement production had gone up to 103 million tonnes (MT), from 80MT in FY20. The company is the largest cement manufacturer in the country with 132.4MT production capacity in March. Jhanwar is working to expand it further to 160MT by FY26 and 200MT thereafter.

In FY23, UltraTech’s net sales rose to ₹63,240 crore. The company commissioned 12.4MT capacity of grey cement, besides a 2.2MT brownfield capacity at Patliputra. Work has also begun on the next growth phase of 22.6MT.

The Indian cement industry is estimated to grow at a CAGR of 6-7% over the next few years with focus on urbanisation and housing, says Jhanwar. “Even with this growth, per capita cement consumption in FY30 will be less than 400 kg, below the global consumption of 510 kg. It points to the growth potential for India as a market.” Jhanwar believes the industry is at the beginning of a strong growth trajectory, which gives UltraTech an opportunity to capitalise.

UltraTech has grown its capacity at around 11.5% CAGR over the last three years, against the industry average of 7%. According to Jhanwar, every capacity addition has improves the company’s competitiveness in terms of cost and customer reach.

In addition to grey cement, UltraTech also has ready-mix concrete (RMC) and white cement categories. It is the third-largest cement company globally (excluding China), and Jhanwar is looking to transform it into a building solutions powerhouse.

Defying The Crises

Supply chain disruptions, manpower displacement and change in market dynamics have strengthened UltraTech, says Jhanwar. “We not only bounced back but did better than before. We leveraged technology to the fullest,” he adds.

The Russia-Ukraine war was another disruption. It led to a four-fold rise in energy prices in the global market. UltraTech’s planned energy purchases helped it tide over the crisis, says Jhanwar.

The cement maker focused on improving four key areas — operational performance, stabilisation of acquired units, project execution at scale and work environment — during the period. It deepened market penetration with an emphasis on green product portfolio. On the cost side, it improved operational efficiencies. “New approaches in energy — commercial and technical — helped reduce costs. Financial management contributed towards achieving the numbers,” says Jhanwar.

During this time, UltraTech also began executing multiple projects simultaneously. “We have executed 17.9MT of production capacity expansion and commenced a further 22.5MT,” adds Jhanwar.

The Next Decade

At the recently concluded annual general meeting, Aditya Birla Group chairman Kumar Managalam Birla spoke about UltraTech’s ambition to increase capacity to 200MT. Jhanwar says the company is putting up systems to achieve the target.

Cost competitiveness remains the focus though. “We run a tight ship in which cost competitiveness is a major lever,” says Jhanwar. He sees market reach and customer service as other supporting factors. “We are transforming from being a product supplier to a solutions provider by understanding customers better. We will put in efforts to understand trends and convert them into products and solutions,” he says.

UltraTech says it intends to use digital as a strategy rather than a tool. “We have an extensive network of channel partners and influencers. UltraTech has pushed for the reach of high-quality and GreenPro-certified products till the last mile. Along with cement and application-based concrete solutions, we offer contemporary building products to modern aspirational house builders as well as infrastructure projects,” says Jhanwar.

Capacity expansion will happen through both organic and inorganic routes. The company’s balance sheet is well positioned to address the investment requirements. As on March 31, 2023, it had a total debt (bank and other borrowings) of ₹8,750 crore.

ESG transition is another mandate for Jhanwar. “Sustainability is central to the way we look at our future. We are on track to achieve the various targets we have taken such as net zero and 100% renewables by 2050; reduction of 27% carbon intensity by 2032,” he says.

Cement being an energy-intensive industry, Jhanwar is looking at avenues for reducing carbon footprint. “Improving operational efficiencies, using waste material as a source for energy, exploring technology options for fossil fuel-free environment and adopting renewables are initiatives in our quest to achieve sustainability targets,” he says. The company has started selecting vendors based on ESG criteria. “We are focusing on getting 60% of our overall power from renewable and waste heat sources by FY30,” says Jhanwar.

He sees a growing demand for cement as the economy marches towards $5 trillion. Moreover, anticipated high growth and increased aspirations of young Indians are likely to lead to high-capacity addition in the cement sector, and consolidation via M&As.

Emerging areas will play a significant role, says Jhanwar. “AI, especially Generative AI, will be used in all areas of business. I see this as a major disruptor going forward,” he concludes.

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