The Indian cement industry is poised for a 6-7% year-on-year growth in volumes for the fiscal year 2025-26 (FY2026), according to a recent report by credit rating agency ICRA. This optimistic projection is underpinned by sustained demand from the housing and infrastructure sectors, bolstered by government initiatives such as the Pradhan Mantri Awas Yojana (PMAY) and increased capital expenditure in infrastructure projects.
ICRA’s analysis indicates that the industry’s capacity utilization is expected to improve modestly, reaching approximately 71% in FY2025, up from 70% in FY2024. This uptick is attributed to the anticipated increase in cement volumes, despite the industry’s ongoing capacity expansions.
In terms of profitability, the report notes that while operating income is projected to expand by 7-8% year-on-year in FY2025, driven primarily by volumetric growth, the operating profit per tonne (OPBITDA/MT) is expected to improve by 1-3% year-on-year to ₹975-1,000/MT. This improvement is attributed to stable cement prices and a reduction in power and fuel costs, along with increased adoption of green power sources.
The industry’s commitment to sustainability is evident, with green power anticipated to constitute 40-42% of the total power mix by March 2025, up from around 35% in March 2023. Major cement players aim to reduce emissions by 15-17% over the next 8-10 years through increased use of blended cement and green power sources such as solar, wind, and waste heat recovery systems (WHRS).
Furthermore, the cement industry is expected to witness significant capacity additions, estimated at 63-70 million metric tonnes (MT) during FY2025-FY2026, with around 33-35 million MT added in FY2025. The eastern and southern regions are projected to lead this expansion.
Despite the high debt dependence to fund ongoing capital expenditure programs, ICRA expects the credit profile of cement producers to remain stable, driven by healthy growth in operating income, improved operating margins, and comfortable leverage and coverage metrics.
The report also highlights a trend towards consolidation in the industry, with the market share of the top five cement companies increasing from 45% in March 2015 to 54% in March 2024, and projected to reach 58-59% by March 2026.
Overall, the Indian cement industry appears well-positioned for steady growth in FY2026, supported by robust demand drivers and strategic initiatives aimed at enhancing sustainability and operational efficiency.