Cement Companies Make a Beeline for ‘Strategic’ South

For Indian cement manufacturers, the strategic focus is shifting southward. UltraTech Cement, a key player in the industry, has recently acquired a 23% stake in Chennai-based India Cements, highlighting this trend. This move aligns UltraTech Cement with other major companies such as Adani Cements — the holding company of Ambuja Cement and ACC, and Shree Cement, which have already established a strong presence in the southern states.

Driving Factors: Housing and Infrastructure Development

Industry experts cite significant housing and infrastructure development across Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, and Telangana as a key driver of this southward shift. The region is witnessing a surge in road projects, including state and national highways, metro rails, and airport constructions. Additionally, industrial sectors are also contributing to the demand for cement.

According to the Cement Manufacturers’ Association, the total installed capacity in the southern states stands at about 184 MTPA, with the region holding the highest production share at 33%.

Economic Rebound and Market Expansion

The economic rebound in neighboring Sri Lanka presents another attractive opportunity for cement companies. “Infrastructure developments and economic rebound in neighboring Sri Lanka, a potential market for cement, is also making the south a hot destination,” said an industry executive.

Recent Acquisitions and Expansions

On Thursday, UltraTech Cement acquired a 23% stake in Chennai-based India Cements for approximately ₹1,889 crore through open-market transactions. This follows the company’s 2023 deal to buy Kesoram Industries, marking its entry into Telangana and adding another 10.75 million tonnes to its total production capacity.

In April, Ambuja Cement, an Adani Group company, agreed to acquire My Home Group’s 1.5 million tonne per annum cement grinding unit in Tuticorin, Tamil Nadu, for an estimated ₹413.75 crore. Subsequently, on June 13, Ambuja Cement signed an agreement to acquire Penna Cement Industries (PCIL) for ₹10,422 crore, facilitating the group’s expansion in southern India and access to the Sri Lankan market.

Shree Cement announced capacity expansion plans in Karnataka, while Dalmia Bharat is in the process of setting up a cement mill in Ariyalur, Tamil Nadu. Existing players in the region include Ramco Cements, India Cements, and Dalmia Bharat.

The southern region of India has become a focal point for cement manufacturers due to its booming housing and infrastructure sectors, coupled with the potential market in Sri Lanka. The strategic acquisitions and expansions by major companies underline the importance of the south in the Indian cement industry’s growth trajectory.

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