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Intervention is the Name of the Game

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Cement channels and solutions in logistics are evolving to relinquish traditional methods for more innovative and modern ones. The key driving factor in this transition is finance. ICR delves into the changes in logistics in the face of automation and data analytics.

The connection between logistics, channels of selling, the revenue line and the cost line were established over the last several decades with a mix of supply chain efficiency and cost optimisation. The recent best cases talk about innovation as the driver of change, which in some cases could be deemed as common sense but that seems to be in short supply.
Take the example of cost. Logistics cost (presumably the highest element of cost in the cement cost hierarchy) is not merely transportation cost that most of us make it out to be but the sum total of transportation, warehousing and distribution, inventory holding, ordering cost and documentation, which includes all the wastes that are associated with this. It also includes the trade-offs that are made, which is where most cement companies differ in their approaches to channels and logistics.
There are so many trade-offs that come in the way of cement manufacturing and distribution right up to reaching it to the customer. Some of these trade-offs include reach, penetration and growth versus the cost of each of these when you construct an end-to-end view of the cement outbound chain. Some trade-offs could be around service level and number of warehouses or direct shipsets versus moving through sticky stocking. There is no end to the number of warehouses that will enhance penetration and reach to the markets and service levels, while inventory holding would zoom.

Working with smarter solutions
Maister’s Square Root Law when applied to cement tends to point to as few stocking points as possible to make the optimisation work, but then Maister’s Rule of Inventory is one-dimensional around safety stocks for reduction of lead time variability and demand variability. It does not look at the trade-offs around inventory and the other objective functions. Thus, the network optimisation programme that most cement companies run is a cauldron where many objective functions go in, but only a few emerge as the winning combination of inter-dependencies on which Management Action is to be ordained. Building algorithms around these inter-dependencies start with rocking the entire boat with data requirements at every stage of the cement journey from the inbound to the outbound, right up to the point where customer exchange happens. Most companies are straddled with one part of the chain governed by the proximity to the resource, while the other outbound part needs a network to establish cost efficiency, together with service levels.
At the end, the optimiser should rule the roost as this could be very complex when constructed over micro markets, prices, availability, service, inventory and transportation cost that need data tables not as static interfaces but a more dynamic one. Most companies have ended with an oversimplification as when complexities rise to the hilt, the solutions tend to become just the opposite. Guided by data and observations, communication and sharing of information, a very complex interaction of all of these is vetted for management review almost on a daily basis. That is where the most successful sales and operations implementation rests in the best of cement companies in India. Most of them have planning algorithms to facilitate these processes. But not as a hands-free approach.
Some innovation in channel and logistics is predicated on the digitisation initiatives that separates data as it exists in the system, with the actual reality on the ground. Data is the source of everything, but it must be real, as we know that prices in spatially separated markets are governed by the equivalence of logistics cost. In simple terms, it means prices must cover logistics cost differences in spatially separated markets. Cement logistics cost being the most sensitive parameter, the actual knowledge of the associated cost of moving millions of parcels of cement over distances in spatially separated markets therefore becomes a huge area of focus. A price, which includes the associated logistics cost, must convey in the information the true cost by which two parcels could be separated, given that similar commodities do not have more significant differentiating factor to make a decision ‘play’. Samuelson’s treatise of 1958 still holds good and the question therefore is to digitise information on price as accurately as possible, where the true cost of logistics is part of the information. Best cases in this regard struggle to achieve a 100 per cent accuracy rate, understandably. But efforts are directed to achieve this with tracking and tracing and control towers and the rest.

Paradigm shifts
The next level of innovation will be to actually move from bagged to bulk entirely and from cement to concrete. That is where the world has moved. This changes the supply chain question and one of the major dimensions holding inventory and warehousing for a sales channel is hugely moderated or eliminated at the end, as selling becomes directly to the projects, no matter how small or large they may be.
The advanced nations have moved to this paradigm, which has changed the entire logistics, channel and innovation question to a different level, where the product cement is converted to a service of concreting at prescribed schedules. This, however, is no small switch, it would obviously mean the setting up of supply chains, that would be different from the current ones, with channel partners who are very different. The optimisation question for Ready Mix Concrete would also be different as there are more than one material source involved, aggregates, sand , gravel etc would step in. To be able to extend this step by step across the whole of India, starting with cities and towns and then the deeper areas would need several actors to step in to see how value can be created. At least the world has many examples where this has progressed with more sophistication of markets in construction. It would, however, need more planning and scheduling, use of digital tools and data driven decision support systems. This is where slowly and steadily some companies are progressing and they would obviously be the leaders in the next transition.

-Procyon Mukherjee

Concrete

Cement Makers’ Margins To Fall Rs 50-75 Per Tonne Amid West Asia Conflict

Crisil Sees Margins Easing Despite Steady Demand

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Crisil said operating margins of Indian cement manufacturers are expected to decline by Rs 50-75 per tonne (t) this fiscal to Rs 925-950 per t due to higher input costs triggered by the West Asia conflict. The analysis covered 18 cement companies accounting for nearly 90 per cent of India’s domestic cement capacity and noted margins had improved sharply to around Rs 1,000 per t in fiscal 2026.

Crisil noted that the reduction would be driven mainly by higher power and fuel costs, which account for about 30 per cent of total costs, as petcoke and imported coal prices have surged amid geopolitical uncertainties. Freight costs, which account for about a quarter of total costs, are also expected to remain elevated because of higher diesel prices. The impact on profitability is likely to be more pronounced in the first half of the fiscal year before easing commodity prices moderate cost pressures later.

The rating agency said steady domestic demand and strong balance sheets should keep credit profiles stable despite the moderation in margins. Green energy currently accounts for 35-40 per cent of the sector’s total electricity consumption and is expected to partly cushion higher energy costs. Operating cash flows are likely to remain resilient, supported by projected 6-7 per cent growth in cement demand this fiscal.

Crisil highlighted that demand growth will be driven primarily by infrastructure spending, which meets about one-third of sector consumption, and by a nearly 18 per cent higher budgetary allocation for core ministries that should support project execution. Weaker rural housing demand amid pressure on agricultural incomes from a possible below-average monsoon may be offset by improved urban housing demand supported by favourable home-loan rates and a strong pipeline of Pradhan Mantri Awas Yojana-Urban projects. Ongoing capacity additions will keep capital expenditure elevated and may lift net debt to EBITDA to between 1.2 and 1.4 times from around 1.0 time last fiscal, though ratios are expected to remain healthy.

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Concrete

UltraTech Board Approves Rs 50 bn Fundraise Via NCDs

Company to issue half a million debentures for expansion plan

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UltraTech Cement’s board of directors has approved raising Rs 5,000 crore (Rs 50 bn) through non?convertible debentures issued in rupees.

The finance committee cleared a proposal to issue up to 500,000 fully paid, unsecured, listed, rated, redeemable, rupee?denominated, non?convertible, non?cumulative debentures of Rs 1 lakh each (Rs 0.1 mn each), aggregating to the Rs 5,000 crore programme.

As of June 2026 the firm reported net debt of Rs 15,875 crore (Rs 158.75 bn) and said its capacity expansion projects under execution are backed by capital expenditure of about Rs 17,000 crore (Rs 170 bn) over the next two to two?and?a?half years.

UltraTech spent Rs 9,500 crore (Rs 95 bn) on capital expenditure in financial year 2026 and in April the group crossed 200.1 mn tonnes per annum of domestic grey cement capacity and 205.5 mn tonnes per annum of global capacity.

The chief financial officer indicated the company would take consolidated capacity beyond 242 mn tonnes per annum, with grey cement capacity reaching 212.7 mn tonnes per annum by the end of financial year 2027. He noted the net debt?to?earnings before interest, taxes, depreciation and amortisation ratio stood at 0.87 times as of June 2026 and the company was confident of ending financial year 2027 with the ratio below one time.

In the first quarter of financial year 2026?27 UltraTech’s net profit attributable to owners rose 16.8 per cent year?on?year to Rs 2,599.3 crore (Rs 25.993 bn) and revenue from operations increased 15.9 per cent to Rs 24,648.20 crore (Rs 246.482 bn). The board approval is expected to complement internal cash flows as the company advances its expansion programme.

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Concrete

Lokesh Lays Stone For Rs 31 Billion Cement Unit In Kadapa

Line-2 expansion to make Kadapa a major cement hub

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Andhra Pradesh Education and IT Minister Nara Lokesh on Wednesday laid the foundation stone for the Line-2 expansion of Dalmia Bharat Cement at Chinnakomerla village in Mylavaram Mandal in Kadapa district. The project carries an investment of Rs 31 billion (bn) and is slated for completion by the third quarter of the financial year 2028. The expansion is intended to boost industrial growth and employment generation across the Rayalaseema region.

Once commissioned, the Kadapa facility will become Dalmia Bharat’s largest integrated cement manufacturing ecosystem in southern India, creating over 1,000 direct and indirect jobs and opening new business avenues for regional micro, small and medium enterprises and transport operators. Lokesh said the expansion signalled growing corporate confidence in the state and reflected the practical ease of doing business that secured repeat investment.

He placed the project within the government’s wider economic targets and recalled the Yuvagalam padayatra commitment to generate two million (mn) jobs within five years, noting that the state would cultivate talent while industry created opportunities. Lokesh highlighted Andhra Pradesh’s competitive pursuit of major manufacturing accounts, mentioning past successes and a personal initiative to engage global investors when persuading them to anchor expansion in the state.

The plant will leverage Kadapa’s abundant limestone reserves to scale production and sustainability. Clinker capacity is planned to rise from two point five million tonnes per annum (mn tpa) to six point one mn tpa, while overall cement output will increase from three point six mn tpa to nine point six mn tpa. The unit is designed to operate on over eighty per cent renewable energy and deploy waste heat recovery, zero liquid discharge, water recycling and advanced AI systems to optimise efficiency. Industries Minister TG Bharat, BC Welfare Minister S. Savitha and Jammalamadugu MLA C. Adinarayana Reddy attended the ceremony.

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