Ambuja Cements resets expansion strategy as Karan Adani flags cost pressures and execution gaps

MUMBAI: Ambuja Cements is resetting its expansion strategy after falling short of its own expectations; promoter Karan Adani is signaling that the company will put a sharper focus on cost discipline and execution while reining in its previous growth plans.

“I think the reason for the reset, I mean, it’s pretty clear that our performance hasn’t been great. We haven’t been able to deliver on the promise we made to our shareholders,” Adani told analysts in a post-earnings interaction on Monday, adding that the reset was driven by the need to correct course and regain control over the app. “If I say 80% of this is about cost, and we really need to take action to make sure we can reduce our cost.”

The company has also taken a more cautious approach to capital allocation, effectively postponing parts of its earlier expansion plan and prioritizing stabilization of existing assets. “There is no point in investing more capital until we can’t deliver what we promised,” Adani said.

Underpinning this reset is a renewed emphasis on building the right team and execution capability, which the company admits underestimated post-acquisition challenges. Adani said when they acquired Ambuja and ACC in September 2022, “there was no team at that time, so it took time for us to build that team.”

The change was accompanied by leadership changes. Ajay Kapur, managing director of Ambuja Cements, retired with effect from January 31, 2026 and was replaced by Vinod Bahety.

Cost pressures

Ambuja Cements Ltd, India’s second-largest cement maker by capacity, missed the Street’s revenue expectations in FY26 as rising costs linked to the West Asian conflict, including goods and services tax (GST)-related changes and state elections, lower demand and utilization of acquired assets remained subdued.

Usage of the newly added facilities, particularly Sanghi and Penna, was seen to be lower. Bahety said that Sanghi was operating at 57% of cement capacity utilization throughout the year, while Penna was operating at 46%.

The company reported consolidated income from operations ₹40,446.04 crore for FY26, up 19% y-o-y, but below consensus estimate ₹41,361.71 crore from 40 analysts surveyed. Bloomberg. Profit attributable to owners increased by 10% ₹4,728.18 crore for fiscal 2026, according to stock exchange filings. Total expenses increased by 19% ₹37,910.76 crore in FY26 compared to FY25.

“FY26 has been a year of resilience for the cement industry, witnessing consolidation, GST 2.0 reforms; adverse weather conditions, global geopolitical factors and state elections have impacted the industry and demand in one way or another,” Bahety, CEO of Ambuja, said in a post-earnings interaction with analysts on Monday.

Operating EBITDA increased ₹6,539 crore in FY26 ₹5,971 crore in FY25, though margins fell from 16.9% to 16.1%. The company produced 73.7 million tonnes of cement in FY26.

“We saw some disruptions in March due to the West Asian war… increased fuel cost and higher packaging costs,” Bahety said. “On the cost side, we saw a slightly higher cost compared to our own expectations, so we were a little disappointed.”

Analysts questioned Ambuja on rising costs despite previous guidance for an exit from lower levels, noting that much of the pressure was occurring across the industry. In response, management said: ₹The 4,000 per tonne figure was a target for the month of release rather than a three-month average, and various internal factors were keeping costs closer to 4,000 per tonne. ₹4,500 per ton. These included plant breakdowns that increased repair and maintenance costs, higher expenses on branding and sales promotion, inefficiencies in fuel use, and abnormal increases in packaging costs, especially in March. As a result, the company was unable to reduce costs as expected during the quarter.

Fuel costs rose as much as 20% in FY26. ₹10,023.78 crore, while freight costs increased by 14% ₹9,497.28 crore.

The cement maker reported a 10% increase in revenue from operations in the March quarter. ₹10,891.68 crore and 78% increase in net profit ₹1,830.15 crore, with the help of tax gains.

“Cost pressures due to constraints in supply of fuel, diesel, packaging bags and depreciation of rupee impacted this quarter and this impact is expected to continue in the first half of FY27,” the company said in a press release.

Looking ahead, Bahety expects “inflation pressure and weak monsoons” to weigh on demand, which “is expected to remain somewhat soft.” He added that price pressure has intensified as demand has weakened, and despite rising costs, the industry continues to face constraints in passing on price increases.