UltraTech, Adani group, Shree, Dalmia, Nuvoco: ICRA sees top 5 firms’ market share rising to 55% by March’2025

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Demand forecast for Cement consumption remains strong in the country. On the back of robust Cement demand forecast, the rating agency  ICRA Limited , believes that the market shares of the top 5 cement companies should climb to 55% by March 2025.

The market share of the top five cement companies—Ultratech Cement, Adani Group companies ( Ambuja Cement and ACC , Shree Cement, Dalmia Cement, and Nuvoco Vistas has increased significantly, from 45% in 2015 to 54% in December 2023.

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ICRA expects this trend to continue, with both organic growth and inorganic expansion driving industry consolidation. In the last nine years, there have been 15 mergers and acquisitions, highlighted ICRA Research. This according to the research have provided access to existing capacity and limestone reserves and also the cost reductions.

Apart from the Adani Group’s acquisitions of ACC and Ambuja Cement, the main cause of previous mergers and acquisitions (M&As) as per ICRA were the acquired entity’s cash flow shortage or the group’s financial strain.

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Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, providing additional insight stated that “While organic growth is expected to continue in the medium term, cement companies are also preferring the inorganic route to boost capacities rapidly, leading to the consolidation in the industry” 

A 28 MT asset block is in the process of being acquired, and given the ambitious expansion goals of the major incumbent businesses that wish to hold onto their market share, ICRA anticipates that M&A agreements will continue.

ICRA anticipates that cement producers’ credit profiles will be steady due to robust operating income growth, improved operating margins, and manageable leverage metrics.

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The leverage metrics of the cement companies, as assessed by Total Debt to operating Ebitda, are predicted to stay comfortable at 1.3-1.4 times in FY2025 compared to 1.4-1.5 times in FY2024, despite the likelihood that the debt dependence will remain high to support the ongoing expenditure plans. Thus, it is anticipated that the coverage metrics will be steady, with DSCR at 2.7–2.8 times, helped by an increase in Operating profit in FY2025.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions

 

 

 

 

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Published: 17 Jun 2024, 03:24 PM IST

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