Mumbai, Nov 12 (NationPress) India’s cement sector is gearing up for a significant expansion, with an anticipated increase in grinding capacity of 160-170 million tonnes (MT) expected from FY 2026 to FY 2028. This marks a notable rise from the 95 MT added over the last three financial years, driven by a robust demand outlook and heightened capacity utilization, according to a Crisil report issued on Wednesday.

To support this growth, substantial capital expenditure (capex) of around Rs 1.2 lakh crore is projected over the next three years, representing an approximate 50% increase compared to the previous three fiscal periods. This investment primarily aims to finance capacity expansions. The associated risks are expected to be lower, as a considerable portion of this expansion will occur through brownfield projects, with most funding sourced from strong operating cash flows.

As a result, the financial leverage of cement producers, indicated by the net debt to earnings before interest, taxes, depreciation, and amortization (Ebitda) ratio, is anticipated to remain stable, maintaining solid credit profiles, the report highlights.

The analysis encompasses 17 cement manufacturers, representing about 85% of the 668 MT installed capacity as of March 31, 2025.

In the preceding three fiscal years, cement demand surged, boasting a compound annual growth rate (CAGR) of 9.5%, propelled by critical sectors like infrastructure and housing. Consequently, capacity utilization rose to approximately 70% last fiscal, surpassing a decadal average of 65%.

Crisil Ratings director Anand Kulkarni stated, “Throughout FY 2026-2028, cement producers are projected to experience healthy incremental demand of 30-40 MT annually, leading to substantial capacity growth.”

“However, the distribution of these incremental capacities might not follow a linear pattern. For instance, this fiscal year is expected to see the commissioning of 70-75 MT, potentially moderating capacity utilization in the short term. Nevertheless, demand is expected to align with supply additions over the three fiscal years, bringing utilization back to around 70%,” he noted.

The report further indicates that while the scale of capacity additions is substantial, associated risks are somewhat alleviated since about 65% of the new capacity will be developed through brownfield projects, which typically involve shorter construction times and fewer land acquisition challenges, resulting in lower capital costs and implementation hurdles.

Moreover, two-thirds of the new capacity will consist of split grinding units, which are independent cement grinding facilities situated away from the primary clinker production site. These units generally entail lower complexity compared to clinker plants, leading to reduced capex and shorter gestation periods of 1-2 years, in contrast to 3-4 years for integrated cement plants. This setup not only facilitates early market access but also minimizes lead distances and freight costs, thanks to their proximity to consumption regions, thereby enabling quicker returns on investment, the report concludes.