From cement to cables: Is UltraTech building the blueprint for India's next infrastructure giant?

Indian Express

22-04-2025

If you bought UltraTech Cement shares five years ago, you have seen a ~4x return, with hardly any drama. No flashy headlines, no overnight rallies, just steady compounding from the country's largest cement player.
In FY24 alone, Ultratech Cement, which is part of the Aditya Birla Group, added Rs 7,000 crore in profit and crossed Rs 70,000 crore in revenue. It sold more cement than ever before, aggressively expanded capacity, and maintained healthy margins despite a volatile cost environment.
However, UltraTech is now rewriting its playbook.
In early 2025, it announced a ₹1,800 crore bet on wires and cables, a segment dominated by names like Polycab and Havells. At first glance, this might seem like a strange pivot. What's a cement major doing in a space filled with copper, conductors, and PVC insulation?
The answer lies in a deeper strategic shift. UltraTech is not just selling cement anymore as it is trying to own the entire homebuilding wallet. Cement, concrete, wall putty, and now wires. It is assembling a full-stack portfolio for India's housing and infrastructure boom.
For investors, this raises two critical questions: Can the cement engine continue to operate at full capacity? And can this new cable venture actually move the needle, or is it a costly distraction?
Let's unpack the fundamentals, the strategy, and what's at stake in UltraTech's next chapter.
Figure 1: Share price of Ultratech Cement Ltd. Source: Screener.in
UltraTech's cement business: A moat built on scale, speed, and strategy
At its core, UltraTech is a volume machine. With a capacity of over 175 million tonnes per annum (mtpa) as of FY25, and aiming for 209 mtpa by FY27, it is not just India's largest cement producer, it is also among the top three globally, outside of China.
Figure 2: Ultratech's cement capacity in mtpa. Source: Quarterly Report Dec 24
But capacity is only part of the story.
What makes UltraTech's cement business special is how efficiently that capacity is used and how intelligently it's being added.
In FY24, the company added over 13 mtpa of capacity across Chhattisgarh, Tamil Nadu, West Bengal, and Rajasthan, with another 5.4 mtpa commissioned in early FY25. These additions were not arbitrary as they were specifically targeted at high-demand regions, enabling UltraTech to maintain market dominance while keeping transportation costs low.
Figure 3: Ultratech's capacity addition. Source: Quarterly Report Dec 24
How does the cement business work?
Cement manufacturing is capital-intensive and regionally competitive. Cement has a low value-to-weight ratio, meaning logistics matter as much as pricing. UltraTech solves this with:
● A pan-India footprint: Operations spread across five regions (north, south, east, west, central), allowing it to serve demand from anywhere without depending on one geography.
● Integrated supply chains: Its plants are often located near limestone mines and clinker units, reducing input costs.
● A strong ready-mix concrete and white cement business: These adjacents not only improve margins but also create downstream stickiness with builders and contractors.
In FY24, UltraTech sold over 110 million tonnes of cement, achieving operating margins of approximately 18%.
Where is the growth coming from?
India's per capita cement consumption is still under 300 kg, compared to 500-600 kg in developed economies. That gap represents structural long-term demand, powered by:
Figure 4: Cement industry landscape. Source: Quarterly Report Dec 24
● Urbanisation and housing: Real estate revival and government-led affordable housing schemes.
● Infrastructure build-out: Roads, bridges, metros, and highways that require bulk cement supply.
● Rural demand: Smaller towns and villages contribute nearly 35 per cent of UltraTech's cement volumes, a market no other player serves at scale.
UltraTech's management has identified that over 65 per cent of its cement demand comes from the housing segment, with 35 per cent from rural housing alone. This gives it a direct line to India's real economy, a trait few industrial businesses can claim.
What is the potential?
Between FY24 and FY27, analysts estimate UltraTech's volumes will grow at a ~10–11% compound annual growth rate (CAGR), with revenue growing at 11 per cent and earnings before interest, tax, depreciation and amortisation (EBITDA) at 19–21 per cent CAGR. That means by FY27, the company could be earning over ₹21,000 crore in EBITDA on ₹96,000 crore in revenues, up from ₹12,700 crore and ₹73,000 crore in FY25E.
And with a capital employed base of ₹1,00,000 crore by FY27, its core return metrics are expected to improve, Return on Capital Employed (ROCE) rising to 18 per cent and Return on Equity (ROE) nearing 15 per cent, both healthy levels for a capital-heavy industry.
In short, UltraTech's cement engine is far from slowing down. It is still the most cost-efficient producer in the country, has the widest reach, and is expanding faster than its peers. The real question is whether this strength can now support and fund the company's next step, its entry into the wires and cables market.
Wiring the future: Why UltraTech is entering the cables business
When UltraTech Cement announced a ₹1,800 crore investment to enter the wires and cables segment in early 2025, the decision caught many by surprise. But it was not as abrupt as it seemed.
Around 65 per cent of UltraTech's cement volumes already come from residential housing. Coincidentally, about 85 per cent of wire demand in India is also tied to the housing segment. The overlap is hard to ignore.
UltraTech is effectively trying to increase its wallet share from the same end user.
If a contractor or homeowner is already buying UltraTech's cement, why not also offer them the wires that go into the walls? This is not a brand pivot, it's an extension of its presence in the construction chain.
A network already in place
The infrastructure to distribute these products already exists. Through its 4,500+ UltraTech Building Solutions (UBS) outlets, the company already serves both individual home builders and institutional buyers. Many of these outlets currently stock wires from other brands like Polycab or KEI Industries.
UltraTech's move is to introduce a branded in-house offering into this ecosystem, thereby gaining control over quality, margins, and shelf space.
Add to this its strong relationships with builders, masons, and electricians—the 'influencer' network in the Indian construction industry—and UltraTech has a ready-made launchpad.
A fast-growing market with strategic focus
India's wires and cables industry is valued at approximately ₹80,000 crore and has seen a CAGR of 13-14 per cent over the past five years. The growth is structurally driven by increasing electrification, rising safety standards, and a consumer shift from unbranded to branded electrical goods.
UltraTech is not entering the whole spectrum. It is narrowing its focus to household wiring and low-voltage cables—the highest-volume, highest-overlap category with its existing customer base. The company has ruled out entering complex high-voltage or extra-high-voltage cable segments for the time being. The goal is to dominate a clearly defined segment, rather than spreading thin across unrelated verticals.
The plant, coming up in Bharuch, Gujarat, will produce 3.5-4 million km of cables annually and is strategically located close to Hindalco's copper supply, copper being the single largest cost component in wire manufacturing.
What could this mean financially?
UltraTech expects to generate ₹9,000–₹12,000 crore in annual revenue from this segment at full scale by FY31. ROCE is targeted at 25 per cent, although the company has cautioned that early margins will be modest as it invests in branding and distribution.
That said, its capital allocation is disciplined: the ₹1,800 crore earmarked for this project is less than 2 per cent of the group's market cap and will be funded through internal accruals.
Perhaps most importantly, the company expects the cables division to mirror the working capital model of its cement business, characterised by minimal receivables, tight inventory cycles, and strong cash conversion. If that holds, the new segment could become self-sustaining fairly quickly.
However, for investors wondering whether this is a risky detour, here's the simple view: UltraTech is not trying to become something new. It is trying to become more of what it already is – the brand that helps build homes in India, brick by brick, wire by wire.
Strong foundation: Cash flows, capital discipline, and debt
UltraTech is in a rare position for an Indian industrial major as it can fund aggressive expansion without stretching its balance sheet.
In FY24, the company incurred capital expenditure of over ₹9,400 crore, yet its net debt increased by only ₹77 crore. In other words, internal cash flows from operations nearly covered one of the largest capital expenditure cycles in its history.
This is no accident.
UltraTech's cement business operates on a tight working capital model, with a significant portion of its sales occurring on an advance or cash-and-carry basis. Inventories and receivables are tightly controlled. Combine that with improving profitability, and the result is a business that generates substantial free cash flow even as it scales up.
What the numbers say
Between FY25 and FY27, analysts expect UltraTech to generate ₹30,000–35,000 crore in operating cash flows from the cement business alone. This comfortably covers the ₹18,000 crore it plans to invest across greenfield and brownfield cement capacity, as well as the ₹1,800 crore earmarked for the wires and cables plant.
Even after accounting for this spend, net debt is expected to remain manageable. From ₹15,300 crore in net debt as of FY24, the figure is expected to peak at around ₹20,400 crore in FY26, and then begin to decline. Crucially, UltraTech's net debt-to-EBITDA ratio is projected to stay below 1.2x, well within comfortable limits for a company of this scale.
This financial prudence is important because it provides the company with flexibility. If raw material costs rise or if demand slows down temporarily, UltraTech will not be forced into reactive decisions. It can stay focused on long-term execution.
Returns are moving in the right direction
Historically, cement expansions tend to compress return ratios in the short term, as new plants take time to reach full capacity. UltraTech saw this too. Its ROCE dipped during the earlier phases of its expansion cycle. But with new plants starting to contribute and margins improving, returns are on the mend.
ROCE is expected to climb from 12 per cent in FY25 to 18 per cent by FY27, while return on equity (ROE) could touch 15 per cent. These are strong numbers for a business with significant fixed assets and operating leverage. In parallel, free cash flows, after accounting for capex, are expected to turn positive again from FY26 onwards.
What is equally noteworthy is how UltraTech is allocating its capital. The wires and cables business, although new, represents just a fraction of its capital expenditure pool. It is not a bet-the-house move. It is a measured extension, backed by cash flows from a rock-solid core.
Valuation check: What the market is pricing in
UltraTech today finds itself priced as a market leader with steady earnings power. At around 55 times FY24 earnings, the stock might appear expensive, but that multiple begins to taper as earnings rise.
By FY27, as net profits nearly double (as per the analysts' expectation), the price-to-earnings ratio moderates closer to 30x. This kind of compression reflects a transition from valuation driven by expectations to one supported by actual delivery.
Note: This does not predict where the stock price could head. It's just an if-then calculation for academic purposes.
But here's the nuance: this entire valuation is built on the back of its cement business alone.
The wires and cables venture, while ambitious, has not yet entered revenue or margin models in a meaningful way. That makes it a pure optionality, a potential future value driver that is not being paid for today.
If successful, it could bring an additional ₹9,000–12,000 crore in annual revenue by the end of the decade, further lifting return ratios and reinforcing UltraTech's role in India's infrastructure economy.
Of course, the road ahead is not without its watchpoints. Cement remains a cyclical industry, vulnerable to cost pressures and infrastructure spending cycles. And any large-scale diversification comes with execution risk, especially in competitive sectors like cables.
But UltraTech has shown a rare ability to scale without losing discipline. It continues to fund growth through internal accruals, to maintain a conservative debt profile, and build for the long haul.
Its valuation, then, is not a bet on reinvention. It is a recognition of strength in the core, with a quiet layer of upside riding on what comes next.
Parth Parikh has over a decade of experience in finance and research and currently heads the growth and content vertical at Finsire. He has a keen interest in Indian and global stocks and holds an FRM Charter along with an MBA in Finance from Narsee Monjee Institute of Management Studies. Previously, he held research positions at various companies.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.