Will India's Cement Industry See Higher Profits in FY26?

New Delhi, July 7 (NationPress) The demand for cement in India is projected to rebound to 6.5-7.5 percent in the current financial year after experiencing a dip to approximately 5 percent in 2024-25. This increase, along with a rise in realisations, is expected to enhance operating profitability by around Rs 100, pushing it slightly above the decadal average, as highlighted in a recent Crisil report released on Monday.

The report indicates that strong accruals and robust balance sheets will maintain the credit profiles of cement manufacturers.

Crisil's analysis is derived from data collected from 17 cement companies, which represent over 85 percent of domestic sales volume.

During the previous financial year, cement demand experienced a lull in the first half, demonstrating a modest growth of 2-3 percent due to a slowdown in construction activities linked to the general elections and an unpredictable monsoon. However, the second half saw a recovery, culminating in an annual growth of around 5 percent.

Sehul Bhatt, director at Crisil Intelligence, stated, “This fiscal year, cement demand will be bolstered by a 7-8 percent growth in the rural housing sector, which constitutes a third of the domestic demand. Rural housing is set to overtake the infrastructure segment as the main driver of demand this fiscal due to anticipated increases in agricultural income from a potentially favorable monsoon. Additionally, higher disposable income due to tax reductions and low inflation will further support rural housing demand.”

On the other hand, the infrastructure sector, which contributes roughly 30 percent to cement demand, is expected to grow at a slower yet steady rate due to reduced national highway project awards over the last two fiscal years and moderate growth in railway capital outlays.

Cement prices have risen significantly in the first quarter of the current fiscal, with expectations of a further increase of 2-4 percent this fiscal year, following two years of price stagnation.

Anand Kulkarni, director at Crisil Ratings, remarked, “With increasing demand and a recovery in realisations amid stable costs, the operating profitability of cement manufacturers is projected to reach Rs 975-1,000 per tonne this fiscal, compared to approximately Rs 880 per tonne in the last fiscal and the decadal average of around Rs 965 per tonne. The growing share of competitively sourced green energy in the power mix will contribute to savings in power and fuel costs, which will help mitigate the Rs 20-30 per tonne increase in raw material prices resulting from the higher costs of limestone, fly ash, and slag.”

However, potential risks such as prolonged monsoons affecting construction activities or reduced infrastructure spending could impact demand. Additionally, fluctuations in global commodity and energy prices due to geopolitical tensions may pose threats to profitability, as noted in the report.