UltraTech Cement is set to broaden its footprint in South India and enter a new state through the acquisition of Kesoram Industries' cement business. The move is anticipated to enhance UltraTech's presence in the region without causing significant disruptions to pricing discipline, although an increase in production volume is expected.

On November 30, Kesoram Industries announced the demerger of its cement business, transferring it to UltraTech Cement through a share swap agreement. As of September, UltraTech Cement operated with a capacity of 20.5 million tonnes per annum (mtpa) in South India, making it the smallest market in its pan-India portfolio. This dynamic is poised to change with strategic acquisitions and expansions.

The deal with Kesoram Industries is projected to bring an additional 10.75 million tonnes of capacity to UltraTech Cement, including two integrated cement units in Sedam (Karnataka) and Basantnagar (Telangana). Notably, this transaction marks UltraTech Cement's entry into the Telangana market, further solidifying its position as the country's largest cement producer.

Vincent KA, a research analyst at Geojit Financial Services, noted that despite Kesoram's current 65% capacity utilisation, UltraTech's pan-India presence is expected to optimise utilisation without causing significant disruptions in the southern region's supply and pricing discipline.

Kesoram's cement assets also include a 0.66 mtpa packing plant in Solapur, Maharashtra.

The South Indian market stands out due to its highest over-capacity and fragmentation within India. However, the region has maintained pricing discipline, avoiding price wars among cement producers. Analysts, such as Vincent KA from Geojit, consider consolidation through acquisitions of existing assets beneficial for the market's pricing discipline.

Anticipating increased volumes, analysts expect heightened dispatches from Karnataka to Maharashtra, potentially impacting pricing, although the extent of the impact remains uncertain.

In addition to the Kesoram deal, UltraTech plans to add another 15 mtpa in the South market by FY27 through planned expansions. Analysts predict that, with these expansions and the acquisition, South India is likely to surpass West India as UltraTech's leading market in terms of capacity. Currently, South India boasts the largest capacity industry-wise, totaling 180 mtpa compared to other regional markets in West, East, Central, and North India.