Specialist
Former executive at UltraTech Cement Ltd
Agenda
- Rationale behind Adani’s (NSE: ADANIENT) Indian cement market entry, Himachal Pradesh shutdown and supply impacts
- Expected impact of competition between UltraTech (NSE: ULTRACEMCO) and Adani on the wider competitive landscape
- 2023 supply, demand and margin outlook for Indian cement
Questions
1.
What do you think was the strategy behind Adani’s entry into the Indian cement industry?
2.
You mentioned that Adani was really the only player in the market to pick up the mentioned assets. Was that just down to the assets’ sheer size and scale, or were there any other risks around them that might have made them unattractive to other takers such as UltraTech?
3.
You mentioned the synergies that the cement business will have with Adani’s existing portfolio. What advantages might these synergies bring to the company vs competing cement producers?
4.
The first few months for Adani haven’t been without hiccups, so could you explain the situation around the shutdown of the company’s newly acquired plants in Himachal Pradesh?
5.
What proportion of Adani’s cement business is impacted by the shutdown?
6.
What options are there for Adani to remedy the situation? Is it to just wait and see, or are there any options to work with non-unionised transportation?
7.
You mentioned that the UltraTech plant in Himachal Pradesh is running at full capacity. How big an impact has the outage had on prices, and is there enough of a change in price?
8.
Due to the season, would I be correct in assuming that current production is sufficient to meet demand, but as we get into March there might be a shortage?
9.
If UltraTech isn’t going to increase prices in a shortage, where is the additional supply going to come from to meet the excess demand? Will it effectively be unmet, or are there other avenues to supply this excess?
10.
How do you expect Adani’s asset acquisition to impact UltraTech’s business and strategy?
11.
Could Adani’s acquisition be a catalyst for triggering further consolidation within the Indian cement industry that might have still happened but over a longer time period?
12.
You mentioned that the Adani assets changed hands at quite a high price. Given the potential for consolidation, is there a danger that we see asset price inflation within the cement industry and assets changing hands above the value they should be?
13.
Now that we have two almost equally sized companies – or three major companies in terms of capacity volumes at the head of India’s cement industry – can you see competition increasing across these 2-3 companies? How might that impact the wider competitive landscape?
14.
Given there’s been a change of ownership and management, do you think there’ll be a material change to the strategy of the assets now that Adani is in charge, other than the aspiration to double the business’s capacity? If the company is successful in doubling the size, where do you think the additional capacity will be located? Which regions of India might be most affected by Adani’s capacity aspirations?
15.
Can you see any defensive mergers taking place between the remaining top two producers?
16.
In the medium term, how do you expect the competitive landscape to evolve and come to an equilibrium once the Adani investment has bedded down and its strategy becomes clear?
17.
How do you think Adani and UltraTech’s competition and combined growth aspirations could impact the smaller, more regionally focused producers?
18.
How much CAPEX can you see the top 4-5 cement manufacturers in India committing to their growth aspirations over the next 3-5 years?
19.
What is your 2023 outlook for cement and demand vs supply volumes across India’s key regions?
20.
What demand growth would you expect in 2023 vs 2022? Do you have a feeling for what that might look like in 2024, given the huge amount of infrastructure spending that’s going on and the multiplier effect, in terms of construction based upon the infrastructure being put in place?
21.
How do you see margins trending for Indian cement producers in 2023, given the declines in input costs around energy and coal in the last quarter or so and the continuing price hikes?
22.
You mentioned that we could be approaching 2019 or pre-pandemic margin levels. Do you think we can get there in 2023, or might this happen in 2024?
23.
Can we expect to see greater pricing power from producers going into the rest of 2023 and 2024? How do pricing hikes take place within the cement industry? Does a market leader such as UltraTech lead with price hikes and then smaller-volume competitors follow?
24.
Given UltraTech’s ability to sell at a premium based on its branding, would it make sense for the company to acquire assets from a Shree, or to acquire Shree outright if it could, given that production would be potentially worth more in UltraTech’s hands than in the existing shareholders’?
25.
How do you see plant utilisation rates evolving throughout 2023, given the fairly robust demand we’ve been discussing?
26.
Is there anything we haven’t touched on that you think our clients should be monitoring or be aware of regarding Adani’s entrance into the Indian cement business? What impact might that have on other industry participants and general profitability?
27.
If we do have a dearth of talent within the Indian sector, can you foresee these companies looking to tap international markets for new C-suite talent?
