Ultratech’s Net Debt Reduction Of ?2,209 Crore

The key takeaway from the June-quarter earnings of UltraTech Cement Ltd was the reduction in its debt. A better handle on working capital and sturdy cash flows led to net debt reduction of ?2,209 crore in the quarter, from its end-March debt of ?16,860 crore. In a post-earnings conference call, the company’s management said that it remains committed to bring down net debt/Ebitda from 1.7times in FY20 to 1 time in FY21. With net debt reducing in the June quarter, the company’s net debt to Ebitda has improved to 1.44times. Ebitda is short for earnings before interest, taxes, depreciation and amortization. Analysts say that with increasing focus on debt reduction, the valuation gap between UltraTech and close competitor Shree Cements Ltd should start narrowing. Estimates show that on a one-year forward EV/Ebitda basis, the former trades at a multiple of 14times. The latter is the most expensive stock in the sector, with a valuation multiple of 20 times.