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Summary: Two cement makers bought their way to scale and, in FY24, earned almost the same on every tonne they sold. Since then one has pulled well ahead. Cement sells at much the same price whoever makes it, so where is the gap coming from, and can the laggard close it?
In FY24, UltraTech and Ambuja earned almost the same EBITDA per tonne. By the June 2026 quarter, UltraTech earned Rs 283 more on every tonne sold. The gap lies in energy costs, freight, plant utilisation and, further down the income statement, depreciation.
The acquisition hangover
Between 2023 and 2025, both expanded through acquisitions: Ambuja bought Sanghi Industries, Penna Cement and a stake in Orient Cement; UltraTech bought India Cements and Kesoram's cement business. Each purchase brought additional capacity, manufacturing locations and distribution reach, but also plants that needed to be integrated and operated efficiently.
In FY24, Ambuja earned Rs 1,103 per tonne, marginally ahead of UltraTech's Rs 1,090. Both fell in FY25 as cement prices softened and new plants added strain; UltraTech's EBITDA per tonne dropped to Rs 925.
The scorecard
| Metric | Company | FY24 | FY25 | FY26 | Q1 FY27 |
|---|---|---|---|---|---|
| Sales volume (million tonnes) | UltraTech | 119 | 135.8 | 152.1 | 41.3 |
| Ambuja | 58 | 63.5 | 73.7 | 17.1 | |
| Volume growth (per cent) | UltraTech | 12.6 | 14.1 | 12 | 12.2 |
| Ambuja | 7.4* | 9.5 | 16.1 | -7.1 | |
| Depreciation (per cent of sales) | UltraTech | 4.4 | 5.3 | 5.2 | 4.9 |
| Ambuja | 4.9 | 7.1 | 8.8 | 8.8 | |
| EBITDA per tonne (Rs) | UltraTech | 1,090 | 925 | 1,119 | 1,214 |
| Ambuja | 1,103 | 940† | 887 | 931 | |
| Capacity at period-end (MTPA) | UltraTech | 146.2 | 188.8 | 196.8 | 205.5 |
| Ambuja | 78.9 | 100.2 | 109 | 109 | |
| Capacity utilisation (per cent) | UltraTech | 85 | 81 | 79 | 81 |
| Ambuja | 79 | 71 | 70 | 65 | |
| *Ambuja's FY24 growth is calculated off a 15-month FY23 base and isn't directly comparable with a standard 12-month year. | |||||
Why have two similarly placed companies diverged? Power and fuel, freight, and raw materials are cement's biggest costs, typically 25-35 per cent, 20-30 per cent and 10-25 per cent of the total, respectively. Cement is a commodity: charge more and the dealer stocks another brand, so both sell at much the same price. The advantage has to come from costs, not prices.
Energy and freight: diverging paths
Between FY24 and FY26, UltraTech cut its power-and-fuel cost by Rs 248 a tonne (Rs 1,536 to Rs 1,288); Ambuja's fell by just Rs 34 (Rs 1,394 to Rs 1,360). This partly reflects timing: UltraTech had already invested in waste-heat recovery and renewables, cutting reliance on purchased power. Ambuja has expanded renewable capacity too, but transmission to its plants isn't complete, so it sells much of that power to others and buys costlier power for its own kilns.
Freight shows a sharper split: UltraTech's cost fell Rs 87 a tonne (Rs 1,468 to Rs 1,381); Ambuja's rose Rs 129 (Rs 1,175 to Rs 1,304). UltraTech's larger network serves customers from plants closer to demand centres, and folding new plants in means more efficient routes. Ambuja's footprint has grown too, but expected savings haven't shown up yet, possibly because some acquired plants serve farther markets, though this has not been established as the cause by the company.
Utilisation: more capacity helps only if plants run
Kilns, the thermally insulated chambers that fire cement clinker, use energy more efficiently at higher loads. UltraTech's plants ran at higher utilisation, and its efficiency gains extended to acquired assets: at India Cements, power use fell from 85.36 to 77.60 kWh a tonne. Ambuja is still raising efficiency at some acquired plants; Sanghi and Penna were reported at just 57 and 46 per cent utilisation. When plants run well below capacity, their fixed costs are spread over fewer tonnes, while inefficient operation can also push up energy consumption per tonne.
UltraTech's utilisation was 79 per cent in FY26 against Ambuja's 70; by Q1 FY27 the gap had widened to 81 against 65. Cement plants carry large fixed costs, so higher output spreads those over more tonnes, while below-capacity plants recover the same costs from less output. UltraTech's larger base gives it more room to absorb new plants' early inefficiencies; Ambuja's Penna and Sanghi assets are still working through theirs.
Depreciation widens the gap
EBITDA captures operating performance before depreciation and financing costs; once that's deducted, the gap between the two companies widens further.
|
FY26
|
UltraTech | Ambuja |
| Depreciation (Rs crore) | 4,644 | 3,570 |
| Average capacity (MTPA) | ~192.8 | ~104.6 |
| Depreciation per tonne of capacity (Rs) | 241 | 341 |
| Capacity utilisation (per cent) | ~79 | ~70 |
| Depreciation per tonne sold (Rs) | 305 | 484 |
| Depreciation (per cent of sales) | 5.2 | 8.8 |
Ambuja's absolute depreciation is lower, but spread across fewer tonnes sold, and its depreciation per tonne of capacity is also higher, so utilisation alone doesn't explain it. It has commissioned substantial new grinding and clinker capacity while integrating acquisitions, and depreciation starts the moment assets go into use, before volumes ramp up; acquired assets can also carry different useful lives. It shows up in EBIT margins: UltraTech's rose from 11.2 per cent in FY25 to 14 in FY26, Ambuja's stayed around 7.3.
What investors should watch next
Ambuja's next phase is less about adding capacity and more about extracting returns from what it has bought. Higher utilisation at Penna, Sanghi and other plants would spread depreciation and fixed costs over more tonnes; better freight efficiency and fuller use of renewable power could narrow the gap further. UltraTech must sustain its savings while integrating its own acquisitions and keeping new capacity productive; its larger base gives it more cushion, but expansion still has to earn its keep.
Both have bought scale. UltraTech has so far been more successful at turning it into lower costs and stronger earnings per tonne. Ambuja's task is to show its acquired capacity, network and renewable investments can do the same. Until utilisation rises and benefits move past depreciation into profit, a bigger footprint alone won't close the gap.
Also read: Cement giants go head-to-head
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