After the announcement of Ultratech cement to increase their capital expenditure of ₹12,886 crores, in order to increase their capacity by the financial year 2025, the share of cement firms closed low on Friday.
UltraTech Cement Ltd announced to increase of 22.6 mpta in its grinding capacity which would be nearly 17% of its capacity post completion of projects on-hand by 2025. The investment for expansion would come through a mix of debt and internal accrual
This has added fear of margin erosion in the sector that is impaired by weak demand, low pricing power, high fuel cost and entry of Adani groups into the cement industry.
The expansion announcement comes as the government plans to spend a record ₹7.5 trillion this year, to build roads and ports to boost growth.
After this announcement, the cement stocks closed lower on Friday. Ultratech Cement closed -5.50%, Ambuja Cements closed -1.34%, ACC cement closed -2.44%, India Cements closed -3.02%, Ramco cements closed -9.11%, JK Lakshmi closed -5.26%, Dalmia Bharat closed -8.50%, JK Cement closed -8.29%, Shree Cement closed -4.64%.
As of Monday, the cement stocks are trading on a weaker side. UltraTech Cement Ltd is trading at ₹5,603.65(-1.33), Ambuja Cements Ltd is trading at ₹365.95 9 (-0.27) and Shree Cement Ltd is trading at ₹20084(-2.68).
In a race to increase its capacity, Shree Cement had earlier said it will double its capacity over the next five-to-six years. Although, it has not been very aggressive in placing orders over the last two years. The share touched a 52-week low of ₹20550 during the Friday trade and closed at ₹20,630 with a negative return of 4.64%.
Orient Cement, Birla Corporation, JSW Cement, and Dalmia Bharat are a few of the other players who have also indicated their capacity expansion sources.
