Rating agency ICRA has projected that India's cement industry will sustain its mid single-digit growth trajectory in the next fiscal year, driven by steady demand from housing and infrastructure projects. The positive outlook reflects the sector's resilience and the supportive policy environment that continues to fuel construction activities across the country.

Growth Projections and Performance Metrics

ICRA expects India's cement industry to achieve robust growth across the forecast period, with specific targets for both the current and upcoming fiscal years.

The agency noted that cement demand remained strong in FY26, with volumes expanding by 8.50% aided by robust construction activities. Post-monsoon construction is expected to pick up pace, leading to sequential improvement in demand during the second half of FY26.

Capacity Expansion and EBITDA Outlook

The industry is positioned for significant capacity expansion over the next two fiscal years. ICRA forecasts the sector will add 85-90 million MTPA capacity during FY26-FY27 combined. This expansion comes as major cement companies are strengthening their market positions through both organic and inorganic growth strategies.

Operational EBITDA is estimated to reach ₹880-930 per metric tonne in FY27, supported by better pricing dynamics and higher volumes. The improved profitability outlook reflects the industry's ability to leverage increased demand while maintaining pricing discipline.

Policy Support and Demand Drivers

Several factors are contributing to the positive demand outlook for the cement sector:

• GST reforms: Reduction in duty on finished cement from 28% to 18%
• Infrastructure spending: Increased government expenditure on infrastructure projects
• Construction activities: Robust housing and infrastructure development
• Post-monsoon recovery: Expected pickup in construction activities

These policy measures and market dynamics are expected to bolster demand momentum through FY26 and FY27, providing a stable foundation for industry growth.

Regional Capacity Utilisation Patterns

Capacity utilisation patterns are expected to vary across different regions of the country. North and central India are likely to witness higher capacity utilisation than the national average of approximately 70.00%. However, the southern region may continue to experience relatively moderate utilisation due to capacity overhang in those markets.

Overall, capacity utilisation of the industry is projected to remain stable at 70-71% in FY27, similar to FY26 levels, despite the expanded capacity base.

Industry Position and Scale

According to the Cement Manufacturers' Association, India's installed cement capacity stands at 700 MTPA, making it the second largest cement manufacturer globally after China. This substantial capacity base, combined with the projected growth rates, positions India's cement industry as a key contributor to the country's infrastructure development and economic growth.

The Indian cement industry is experiencing a complex interplay of factors that are likely to impact its earnings trajectory. The September quarter may have marked a peak in earnings for cement producers, as they face headwinds from recent policy changes and rising input costs.

GST Reduction and Pricing Dynamics

The government's decision to reduce the Goods and Services Tax (GST) on cement from 28% to 18% has prompted price adjustments across the industry. This move, while beneficial for consumers, has put pressure on cement companies to reduce their prices.

The table above illustrates the pricing dynamics, showing a year-on-year increase but a sequential decline, reflecting the immediate impact of the GST reduction.

Cost Pressures and Operational Challenges

Rising input costs are posing challenges for cement manufacturers:

These cost pressures are likely to squeeze profit margins in the coming quarters, potentially offsetting gains from increased sales volumes.

Industry Capacity and Demand

The cement sector is poised for significant expansion:

While demand shows moderate growth, the substantial capacity additions may lead to pressure on utilization rates, potentially affecting profitability across the industry.

Company Performance Highlights

• UltraTech Cement and Adani Cement are expected to report double-digit volume growth, primarily driven by recent acquisitions.
• Industry-wide sales are projected to have increased by 10-15% year-on-year.
• Profits are anticipated to double, albeit from a low base in the previous year.

Financial Metrics

While the EBITDA per tonne shows significant improvement year-on-year, a sequential decline from the June quarter is expected.

Outlook

The Indian cement sector is at a crucial juncture. While the GST reduction may stimulate demand in the long term, short-term price pressures and rising costs pose challenges. The industry's ability to balance capacity utilization with demand growth will be critical in maintaining profitability.

As the sector navigates these challenges, investors and industry observers should closely monitor how companies adapt their strategies to maintain growth and profitability in this evolving landscape.