Volume growth
In May 2022, Adani Group acquired controlling stakes in Ambuja Cements and ACC for ₹81,000 crore. Ambuja Cements which already owns 50.05 per cent stake in ACC is now in the process of amalgamating the company with itself. With a capacity of 67 mtpa (million tonnes per annum) at the time, the acquisition price was around $157 EV per tonne. The combined capacity has increased to 109 mtpa as of December 2025 and is currently trading around $120 EV per tonne. This includes organic expansion and acquisitions of Sanghi (acquired at EV per tonne of $100), Penna ($90 per tonne) and Orient ($113 per tonne)—which is the most recent in April 2025.
The company intends to reach 155 mtpa by March 2028. It was supposed to reach 118 mtpa by FY26-end, but has postponed a 3-mtpa capacity opening to Q1FY27 and intends to reach 115 mtpa by the fiscal-end. The other milestone is 130-132 mtpa by FY27-end.
The expansion plan also involves 15-mtpa capacity unlocked by debottlenecking. The company intends to undertake the process at a relatively-lower cost of $48 per tonne. Ambuja Cements plans to spend ₹8,000 crore per year on expansion both organically and inorganically. But with cement prices and valuations increasing, the share of inorganic acquisitions may be lower.
Cost efficiency
The company has not implemented an efficiency programme during FY24-9MFY26, which is reflected in the flat trend of cost per tonne, as shown in the figure. In Q3FY26, owing to branding, one-time plant maintenance costs and closure of old units, the costs spiked 6 per cent on a quarter-on-quarter basis. The company has reported return to normal range of costs in January operations after the one-time costs.
But in the long run, Ambuja Cements aims to lower operational costs by 5 per cent per year in FY27 and FY28, which should improve EBITDA per tonne by 30-40 per cent by FY28. The levers include power, fuel, logistics and raw materials.
The company intends to improve power costs by ₹100-125 per tonne through renewable energy inclusion compared to the current cost break-up of ₹4,576 per tonne in 9MFY26. It has a current capacity of 900 MW, which contributes to 37 per cent power consumption and is expected to touch 60 per cent by FY28. With sharply lower cost of solar panels that associate companies in Adani Group produce, the target should be within reach.
Fuel costs are targeted to improve by ₹150 per tonne owing to better utilisation of fuel in newly-added plants. The company is setting up grinding units too as a part of expansion, which should target lower logistics costs by ₹100-125 per tonne, along with wider presence of the consolidated entity from the recent acquisitions. The large operational capacity and an integrated platform, which the company has operationalised, should deliver lower raw material costs along with other operational efficiencies through procurement management.
It intends to invest ₹2,000 crore for these projects in FY27 and a similar run-rate can be expected in FY28 as well.
Financials, valuation
As mentioned, Ambuja Cements is trading at a 17 per cent discount to a five-year average of 15 times one-year forward EV/EBITDA. Even on a replacement basis of EV/tonne, the company with more than 100-mtpa capacity is trading at $120 per tonne—which is closer to mid-sized players with 8-10 mtpa capacity that it has acquired in the last three years in the $90-110 per tonne range. The recent quarter’s miss on cost efficiency coupled with volatility on energy prices have impacted the stock, which has declined 17 per cent in the last one month.
On the energy front, cement production uses coal for fuel, electricity (renewable energy or grid) for power, and freight costs are influenced by petrol prices. The three factors so far have been insulated by energy price volatility. Coal, a leading cost, has been on a downward trajectory since 2022-23, declining from $650 per tonne at peak to $180-190 per tonne in December before recovering to $210 per tonne now. But with speculative interest driving prices of energy, a resolution of the US-Iran conflict can end the heightened volatility.
Consensus estimates are pointing to a 16 per cent revenue CAGR in FY25-28. This indicates a healthy but conservative estimate of capacity addition to 140-142 mtpa by FY28, based on our assumption of 2-3 per cent annual cement price growth and 75 per cent capacity utilisation. But EBITDA margin estimates at 21 per cent in FY28 is indicating only a marginal cost per tonne improvement of ₹50-80 per tonne compared to company estimates of ₹400-500 per tonne by FY28 from FY25.
Ambuja Cements’ lower valuation on conservative growth estimates provides a decent margin of safety in the current period for investors to opportunistically accumulate the stock on corrections.
Published on March 14, 2026