New Delhi, Sep 23 (NationPress) A recent report indicates that the reduction in Goods and Services Tax (GST) is set to enhance the operating profit of cement companies by Rs 100-150 per metric tonne (MT). This governmental decision is also projected to decrease overall construction costs in rural housing by 0.8-1 percent, helping to boost volumes and support increased capacity expansion.

With robust demand for cement, the average realisation (ex-factory price excluding GST) is anticipated to grow by 3-5 percent in FY26, despite input prices remaining stable, according to a report by credit rating agency ICRA.

Moreover, the Operating Profit Before Interest, Taxes, Depreciation, and Amortisation (OPBIDTA) is projected to rise by 12-18 percent to Rs 900-950/MT in FY2026.

Cement volumes have surged by 8.5 percent in the first five months of FY26, driven by strong demand from the housing and infrastructure sectors, even in the face of early monsoon onset in certain areas.

The price of cement has risen by 7.4 percent year-on-year (YoY) in the first five months of the current fiscal, with significant increases noted in the northern and eastern regions.

The trend of input prices, particularly for pet coke and freight, is closely tied to global crude prices, which remain vulnerable to geopolitical factors.

With the recent GST rate reduction from 28 percent to 18 percent, it is expected that these savings will be passed on to consumers, who, with average cement retail prices currently between Rs 350–360 per bag, could see benefits of Rs 26–28 per bag, as per the report.

In FY25, the OPBIDTA/MT had dropped by 16 percent YoY due to poor realisations, especially during the first half of FY2025, which was impacted by prolonged monsoon and government capital expenditure challenges amid the General Elections.

Overall, the credit profile of major cement manufacturers is expected to remain stable, supported by a healthy increase in operating income, anticipated improvements in operating margins, and solid leverage metrics.

The industry has experienced consolidation in recent years, with larger players expected to outperform mid-sized companies in the medium term.

“ICRA projects that green power will constitute 43-45 percent of the total power mix by March 2026, up from around 35 percent as of March 2023, for the cement firms in ICRA’s sample,” stated Anupama Reddy, Vice President and Co-Group Head of Corporate Ratings at ICRA.

The leading cement manufacturers in the country aim to cut emissions by 15-17 percent over the next 8-10 years by increasing the use of blended cement, which requires less clinker and therefore less fuel, while enhancing the share of green energy through a combination of solar, wind, and waste heat recovery systems (WHRS), Reddy added.