Cement Volumes Seen Growing 6–7% in FY27 as Capacity Expansion Accelerates: ICRA

• Cement demand remains strong, driven by housing and infrastructure projects

• Industry capacity to expand by up to 90 MTPA during FY26–FY27

• Profitability to improve in FY26, with mild pressure expected in FY27

India’s cement sector is poised to sustain its growth momentum over the next two financial years, with volumes expected to rise by 6–7 per cent in FY27, supported by healthy demand from housing and infrastructure projects, according to a recent report by rating agency ICRA.

The outlook follows a strong performance in the current fiscal year. Despite a higher base in the latter half of FY25, the cement industry recorded volume growth of 6.5–7.5 per cent in FY26, reflecting steady construction activity across regions. During the first eight months of FY26 alone, cement volumes increased by 8.5 per cent, indicating robust on-ground demand.

ICRA expects demand to gain further traction in the second half of FY26 as construction activity typically picks up after the monsoon season. The agency also highlighted that the government’s continued emphasis on infrastructure development—along with housing demand in both urban and semi-urban markets—will remain key growth drivers.

Policy Support and Demand Drivers

Beyond infrastructure spending, the possibility of a reduction in Goods and Services Tax (GST) on cement is seen as an additional positive for demand in FY26 and FY27. While no formal announcement has been made, any tax relief could improve affordability and accelerate consumption, especially in price-sensitive housing segments.

With demand conditions remaining favourable, cement manufacturers are pressing ahead with aggressive capacity expansion plans. According to ICRA estimates, the industry is likely to add 85–90 million tonnes per annum (MTPA) of new capacity during FY26–FY27. Of this, 43–45 MTPA is expected to be commissioned in FY26, followed by another 42–44 MTPA in FY27.

These expansions are being executed through a mix of organic growth and acquisitions, as companies look to strengthen their regional presence and gain scale advantages.

Profitability Outlook: FY26 Strong, FY27 Moderates

Commenting on sector profitability, Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings at ICRA, said margins are expected to improve meaningfully in FY26.

According to ICRA’s estimates, operating profit before interest, depreciation, tax and amortisation (OPBITDA) per tonne is projected to rise to ₹900–950 per tonne in FY26, compared with around ₹810 per tonne in FY25. The improvement will be driven by better pricing, higher volumes, and operating leverage benefits.

However, the agency cautioned that earnings may see some moderation in FY27. Rising input costs—particularly pet coke, fuel, and freight expenses—could weigh on margins. These costs are closely linked to global crude oil prices and geopolitical developments, which remain volatile.

For FY27, ICRA estimates OPBITDA per tonne in the range of ₹880–930, indicating stable but slightly compressed margins compared to FY26.

Regional Performance and Capacity Utilisation

On a regional basis, North and Central India are expected to outperform the national average in terms of capacity utilisation. These regions continue to benefit from strong housing demand, road construction, and public infrastructure projects.

In contrast, the southern region may continue to report relatively moderate utilisation levels due to an existing capacity overhang. However, recent merger and acquisition activity in the southern market has helped large cement players consolidate capacity and strengthen their regional as well as pan-India footprint.

Overall, ICRA expects industry-wide capacity utilisation to remain stable at around 70–71 per cent in FY27, broadly in line with FY26 levels, even as the total installed capacity expands significantly.

Steady Growth Path Ahead

Taken together, the outlook suggests that India’s cement industry is entering a phase of measured and sustainable growth. While cost pressures and regional imbalances remain challenges, strong demand fundamentals, infrastructure-led consumption, and capacity additions position the sector well for the medium term.

As construction activity continues to expand across housing, transport, and urban development, cement volumes are expected to stay on a steady upward trajectory through FY27.