How are UltraTech Cement and Adani outperforming the cement sector?

Synopsis: India’s cement sector is growing in 2025, but utilisation is still stuck near 60 percent even though production reached 453 million tonnes in FY25. Yet two companies are moving ahead faster with bigger plants, cheaper energy, and quicker expansion. What is helping UltraTech and Adani pull ahead of everyone else?

India’s cement sector enters 2025 with demand improving and utilisation still hovering near the 60 percent mark. Most players are growing steadily, but two companies are widening the gap with faster expansion, smarter costs, and sharper execution. What is helping UltraTech and Adani outperform the rest of the industry so clearly?

Indian Cement Sector 2025 

According to a report from India Brand Equity Foundation, India is the world’s second-largest cement producer, holding over 8 percent of global installed capacity. Nearly 98 percent of this capacity is controlled by the private sector, with the top 20 players contributing about 70 percent of total output. Extensive limestone reserves across India continue to support long-term growth prospects.

Cement production in FY25 rose 6.3 percent year-on-year to 453 million tonnes, compared to 426.29 million tonnes in FY24. In the April–July period of FY26, output increased 8.9 percent year-on-year, with July 2025 alone recording an 11.7 percent rise. The sector grew 9 percent year-on-year in May 2025 to 39.6 million tonnes, boosted by strong volume growth from private majors such as UltraTech and Adani. Prices increased 8 percent year-on-year, with southern markets seeing a Rs. 10 per bag hike in August despite the monsoon.

Policy changes are also reshaping the sector. The GST overhaul announced in September 2025 is expected to bring down cement prices by Rs. 30-35 per 50-kg bag, easing construction costs and supporting demand. Cement freight handled at ports rose to 2.98 MMT in April-July 2025 from 2.22 MMT a year earlier.

Cement consumption, which stood at 445 MMT in FY24, is projected to reach 450.78 MMT by FY27 and 670 MMT by 2030. ICRA expects demand to grow 4-5 percent in FY25 and 6-7 percent in FY26, supported by sustained housing and infrastructure activity. Government housing programmes such as PMAY, along with a 10 percent rise in central infrastructure spending and an 11 percent increase in state budgets, are strengthening demand. Rural housing contributes 32-34 percent of total consumption, while urban housing demand is improving under PMAY-Urban.

Exports of panel cement, clinker, and asbestos products reached Rs. 5,845 crore in FY25, while imports amounted to Rs. 1,543 crore. With coastal plants in regions like Gujarat and Visakhapatnam providing logistical advantages, India is well positioned to become a major exporter of clinker and grey cement to the Middle East, Africa, and other developing markets.

Industry Characteristics

Cement is a commodity with almost no differentiation, so branding has little influence and pricing depends largely on competition. Buyers generally choose whichever brand offers the lowest price. Since transportation is expensive, cement prices are determined locally rather than nationally, which further reduces customer loyalty, most consumers simply opt for the most affordable supplier in their area.

The manufacturing process is also fairly straightforward. Limestone and clay account for about 19 percent of production costs, while power and fuel needed to run the furnace make up around 31 percent. After production, freight adds another 26 percent, and the remaining 24 percent falls under other expenses.

Highly Cyclical Industry Patterns

Demand for cement varies depending on its end use, whether it is needed for housing, roads, or large infrastructure projects. As a result, cement sales move in line with the economic cycles of these segments. When construction activity in homes, roads, or dams is strong, cement demand rises; this cyclical movement is influenced by broader macroeconomic trends.

Because cement is tightly connected to a country’s infrastructure development, its performance tends to mirror GDP growth. These broader cycles are further divided into seasonal patterns. Construction activity fluctuates around festivals, the monsoon period, and even election timelines. When this seasonality combines with overall cyclicality, it leads to unpredictable and uneven revenue patterns for cement companies.

Cement functions as a regional rather than a nationwide industry because transporting it over long distances is too expensive. Beyond roughly 200-300 km, freight costs become uneconomical, meaning that demand, supply, and pricing are dictated by local conditions such as climate, labour availability, and nearby infrastructure activity. As a result, every region effectively operates as its own independent cement market.

According to a report, In the North, demand is projected to grow at a steady 6-7 percent CAGR through 2029, supported by infrastructure and smart city developments, although pakka-housing growth is nearing saturation. The West is expected to maintain a 5.5-6.5 percent CAGR, with the bullet train project helping sustain infrastructure-driven demand. 

The East remains the fastest-growing market, with an estimated 8-9 percent CAGR until 2029, largely due to rural housing deficits and low per capita consumption, which leave significant room for expansion.

The North-East, though the smallest region, is set for a strong 7.5-8.5 percent CAGR, driven by rapid additions of airports, highways, and railway lines that are reshaping local demand. The Central region is forecast to grow at 7-8 percent CAGR, with metro connectivity and waterway development in states like Uttar Pradesh and Bihar opening new areas of consumption. In the South, demand is recovering to a 6-7 percent CAGR after post-COVID and election-related softness, with Tamil Nadu and Karnataka leading the revival through active metro and road construction.

Cement is available in several types, each suited to different construction needs. OPC (Ordinary Portland Cement) is the standard, quick-setting variety used widely in construction. It delivers rapid strength, making it ideal for beams, slabs, pavements, and general structural work. PPC (Portland Pozzolana Cement) is produced by blending ordinary cement with fly ash, it is more economical and offers better durability. It performs well in damp environments and is often used for dams, sewage systems, and long-lasting structures.

PSC (Portland Slag Cement) is created using by-products from steel manufacturing, it generates less heat during setting and is less prone to cracking. This makes it suitable for large-scale projects like flyovers, water tanks, and heavy infrastructure. Composite Cement combines materials such as fly ash, slag, and clinker to improve strength and sustainability. It is the most environmentally friendly option and can be used across a wide range of construction applications.

Each type varies in cost because the main input, clinker, a hardened substance formed by heating limestone and clay is the most expensive component, requiring high fuel consumption. 

Why Are Adani & Ultratech Outperforming The Cement Industry?

A big part of why Adani and UltraTech are pulling ahead is their ability to own the cost curve. In a sector where pricing power is limited and cost cuts have mostly plateaued, the companies that stay the lowest-cost producers inevitably outperform. Even a small Rs. 1 increase per bag lifts the top ten players’ EBITDA by Rs. 67 billion, which shows how tightly margins are linked to cost efficiency. That is why both Adani and UltraTech have doubled down on technologies and energy strategies that give them structural cost advantages.

Their strategy is built around de-risking energy through captive power and aggressive adoption of green energy. Power and fuel make up nearly a third of cement production costs, so running on cheaper, controllable energy is a major competitive lever. Renewable power is already 40 to 50 percent cheaper than grid electricity, and waste heat recovery is even more economical. As a result, green power has moved from just 7 percent of industry consumption in FY15 to 35 percent today, and it is expected to hit 50 percent by FY27. This shift is fundamentally reshaping cost structures across the sector, yet Adani and UltraTech are far ahead of the curve.

With  power and fuel accounting for  31 percent of costs, the players who secure long-term, low-cost energy and logistics become the natural winners. Adani and UltraTech aren’t outperforming because demand is booming; they are outperforming because they have structurally redesigned their cost base in ways most rivals are still catching up with.

Another reason Adani and UltraTech are outperforming is their ability to improve capacity utilisation, a critical lever in a sector where overall utilisation has been between 60 and 70 percent for the past decade. UltraTech, for instance, has been expanding its capacity at twice the industry pace, registering a 10 percent CAGR between FY14 and FY24, compared with the industry’s 5 percent. With plans to reach 200 MTPA by FY27, the company relies heavily on acquisitions in addition to organic growth, enabling rapid ramp-up of utilisation rates to an expected 86-87 percent, far above the sector average.

Breaking down the numbers, UltraTech added 104.2 MTPA over the last decade, with 60.5 MTPA coming from inorganic growth. In comparison, the Adani Group added 88.9 MTPA entirely through acquisitions, while Dalmia Bharat and Shree Cement added 32.8 MTPA and 38.9 MTPA, with inorganic contributions of 48 percent and just 4 percent, respectively. The strategy of using acquisitions allows Adani and UltraTech to scale quickly, whereas competitors relying mostly on organic growth face slower utilisation improvements.

Current expansion plans remain aggressive. UltraTech commissioned 17.4 MTPA in FY25, including the acquisition of Kesoram Cement, and has earmarked Rs. 32,400 crore (USD 3.9 billion) to reach 200 MTPA by 2027. Ultratech currently has existing assets of about 166.76 MTPA.  Adani Cements (including Ambuja Cements, ACC, Sanghi, Penna and Orient) in total have a capacity of 107 MTPA as on September 2025 and plans to achieve 155 MTPA by FY28. Other players like JSW Cement, Dalmia Bharat, Shree Cement, and Ramco Cements are expanding aggressively, but Adani and UltraTech’s combination of scale, acquisitions, and rapid capacity ramp-up gives them a clear utilisation advantage that drives outperformance. It is to be noted that Adani Cements has plans to scale up to 155 MTPA by FY28, However Ultratech Cement being the the second largest cement company globally by capacity and the largest by sales volume (excluding China) has already plans to reach 200 MTPA by 2027.

Adani and UltraTech are also leveraging geography as a key competitive strategy, turning plant locations into a structural advantage. Cement is bulky and costly to transport, so locating plants near demand centers is critical to keep freight costs in check. Top players adopt a split-location approach, with clinker production situated close to limestone mines and grinding units placed near urban markets. This setup reduces logistics expenses while ensuring timely supply to major cities.

Access to raw materials, particularly captive limestone mines, further strengthens their position. Limestone is essential for clinker production, but availability is increasingly constrained, making proximity to deposits a major advantage. Being strategically located near high-demand hubs such as Mumbai, Bengaluru, and Hyderabad allows these companies to efficiently serve large-scale infrastructure projects, including metro networks, highway expansions, and high-rise developments.

By diversifying regionally and optimizing plant placement, Adani and UltraTech not only lower costs but also mitigate risks from local disruptions like pollution curbs, raw material shortages, or unseasonal weather. This geographic strategy enhances margins, boosts supply efficiency, and creates substantial entry barriers for competitors, reinforcing their leadership in the industry.

-Manan Gangwar

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