Whalesbook
Ambuja Cements is cutting its capital expenditure for fiscal year 2027 by 15%. This decision marks a "pause and course correct" strategy designed to address major project delays, cost overruns, and underperformance from recent acquisitions. Promoter Karan Adani explained these execution issues to investors.
Adani Details Project Execution Failures
Karan Adani detailed critical errors in project execution. He explained that the company selected the wrong contractors, lacked dedicated execution teams when acquiring assets, and started projects without full engineering plans. "We did not choose the right contractor... there was no team initially... and a lot of projects were started without full engineering being done," Adani said.
Underperformance at Recent Acquisitions
Operational issues are particularly evident at recent acquisitions, Sanghi Cement and Penna Cement. Karan Adani pointed to breakdowns, delayed maintenance, and reduced reliability at these sites, which are hurting their performance. Sanghi Cement is currently running at 56% capacity, and Penna Cement at 46%. This is far below the 75-80% utilization of Ambuja's established assets and Orient Cement's full capacity operations.
Rising Costs Impact Profitability
Ambuja Cements is also battling higher-than-expected costs. These include increased freight, fuel inflation, packaging, state taxes, and branding expenses. The cost of production for FY26 averaged about ₹4,400 per tonne, above the company's ₹4,000 target, although March saw a slight improvement to ₹4,100. Although the company still plans to increase capacity to 119 million tonnes per annum by the end of FY27, the project timelines are being re-evaluated.
Focus on Execution and Select Growth
Ambuja Cements remains committed to growth but is adjusting timelines instead of its ultimate targets. For the next six months, the company will prioritize completing engineering tasks, reinforcing project execution standards, and enhancing plant reliability. Future expansion will be more selective, cost-conscious, and strategically placed to build on current market share and logistics. Planned projects include a new limestone block in Assam and a clinker line at Mundra.