Dalmia Bharat Ltd is expanding its footprint by making a strategic investment of about ₹3,520 crore, to be funded via debt and internal accruals. The cement maker will establish a 3.6 million tonnes per annum (mtpa) clinker unit and a 3mtpa grinding unit at its plant in Belgaum, Karnataka. It will also set up a 3mtpa capacity greenfield split grinding unit in Pune, Maharashtra. These units would be commissioned by the March quarter of FY27.
With these, Dalmia is looking to cater and improve penetration in southern and untapped western Maharashtra markets. Taking into account these expansions and the ongoing 2.9mtpa capacity expansion at Assam and Bihar, Dalmia’s total installed cement capacity will grow to 55.5mtpa.
Large cement companies are fighting stiff competition, forcing them to chase market share gains. So, these expansions are directionally positive for Dalmia. However, to meet its mammoth target of becoming a pan-India cement and achieving 75mtpa capacity by FY28 and 110-130mtpa by FY31, more and timely capacity additions are a must.
Time will tell
“The FY28 target implies a 14% CAGR (FY24-28), which we consider to be aggressive, but not something we have not seen before, Peers such as Ultratech and Ambuja are expanding at a similar rate, around 12% compound annual growth rate (FY24-27) but most of their projects are in advance stages,” said Nomura Global Markets Research report dated 3 February.
Given the steep timeline, the broking firm expects more capacity expansion announcements from Dalmia in 2025.
The management is expected to unveil a detailed capital allocation plan by July to reach its 75mtpa goal. This should help increase visibility on the company’s long-term growth. With Jaiprakash Associates’ assets entering insolvency proceedings, concerns over capacity expansions have weighed on investors’ sentiments. In the December quarter (Q3FY25) earnings call, the management said the FY25 capital expenditure projection is nearly ₹3,000 crore, with a similar level expected in FY26.
Meanwhile, Q3FY25 volumes were unimpressive, falling about 2% year-on-year at 6.7 million tonnes. Its key markets of south and east India continued to face pricing pressure as competition hurt realizations. These issues have kept the stock on the back foot, falling 17% during the past year.
Dalmia’s shares are flirting with its 52-week low of ₹1,651.40 apiece seen in June. Apart from pricing trends, a meaningful re-rating in the stock largely hinges on its strategy to reach the set targets.