UltraTech's India Cements cost capex triples to ₹2,000 cr without explanation
The cement giant reported a record Q1 with 13.1% volume growth, but a three-fold jump in the India Cements cost-improvement program raises questions on capital allocation clarity.
What's new
- UltraTech's Q1 FY27 was its highest-ever: revenue up 16%, EBITDA ₹5,146 cr, PAT ₹2,604 cr.
- Domestic grey cement volumes grew 13.1% YoY, utilisation hit 81% vs 76% last year.
- India Cements like-for-like revenue rose 21% YoY to ₹993 cr; brand migration to UltraTech completed.
Themes from the call
Demand
Demand was strong across infrastructure, housing and urban real estate; East was slow due to elections and labour shortages, but structural catalysts remain.
Margins
Operating EBITDA per ton stayed above ₹1,200 despite a ₹40/ton fuel cost increase, helped by cost discipline and higher volumes.
Capital allocation
Expansion capex of ₹17,000 cr over 2-2.5 years to take capacity beyond 242 MT; green power to reach 47% of requirements, targeted 86% by FY28.
Guidance watch
- FY27 domestic grey volume growth guided in double digits; Q2 industry volume expected at 7-8%.
- Q2 FY27 total cost seen rising ₹130-140/ton sequentially; H2 variable costs may ease if geopolitical conditions improve.
- UltraTech EBITDA/ton target ₹1,400 by Q4 FY28, assuming no conflicts; net debt/EBITDA below 1x by FY27-end.
- India Cements EBITDA/ton trajectory improved to ₹603; full capex benefit expected from Q4 FY28.
Risk flags
- India Cements cost-improvement capex triples to ₹2,000 cr without scope clarification, changing the expected return profile.
- Fuel inflation and West Asia uncertainty could derail H2 cost relief assumptions.
- Cables and wires profitability and scale targets not guided; initial working capital will be elevated.
Key quotes
-
"We absorbed the shock better than any peer and we will harvest the relief faster than any peer."
— Atul Daga, CFO, prepared remarks -
"At India Cements, we have committed already INR601 crores and spent INR144 crores on the program."
— UltraTech management, Jan 2026 call -
"Cost improvement capex of about 2,000 crores is being deployed into waste heat recovery, preheater upgradation, and cooler upgradation."
— UltraTech management, Jul 2026 call
The brief
UltraTech delivered a record first quarter — revenue up 16%, EBITDA at ₹5,146 crore, and domestic volume growth of 13.1% that outpaced the industry. The story of cost discipline and volume absorption is intact: EBITDA per ton stayed above ₹1,200 even as fuel costs rose ₹40 a ton. Management called it absorbing the shock better than any peer. But beneath the headline numbers, a capital allocation question has emerged. The India Cements cost-improvement program, which stood at ₹601 crore in January, has now ballooned to about ₹2,000 crore. No explanation was offered for the tripling. The scope, timeline and return profile of the turnaround have changed without transparency. That matters because the India Cements acquisition is central to UltraTech's capacity story and margin bridge. Separately, the company reiterated its FY27 volume guidance (double digits), expects Q2 costs to rise ₹130-140 per ton, and targets EBITDA per ton of ₹1,400 by March 2028 — with the caveat 'assuming no conflicts or wars'. The cables and wires launch remains on track for Q3 FY27. The record quarter is real. The capex escalation, left unexplained, is a crack in the communication that investors should press on.
Record Q1 shows UltraTech's strength; the unexplained tripling of India Cements capex needs a why.