Indian Cement Sector to Boost Capacity by 150-160 MTPA by Fiscal 2028, Says Crisil

The Indian cement sector is poised for significant growth, planning to add 150-160 MTPA capacity through both organic and inorganic routes from this fiscal year until 2028. This expansion is in anticipation of increased demand in infrastructure and housing, as well as a strategic move to capture market share in a competitive landscape. Over the past five years, the industry has already increased its capacity by 119 MTPA, reaching a total of 595 MTPA.

A substantial portion of this capacity addition, about 70-75 MT, is expected to be commissioned in the next fiscal year, with a focus on the eastern and central regions of India. Large players are projected to account for 50-55% of this planned capacity addition.

Despite a slight dip in cement prices during April-December 2023, the demand is forecasted to grow by 10-12% this fiscal year, driven by government initiatives in affordable housing and pre-election infrastructure spending. However, the influx of new supply and heightened competition may limit price growth to 0-1%, maintaining prices at Rs 390-395 per 50 kg bag and keeping utilization rates at 70-75%.

The sector's operating margin is expected to expand by 300-350 basis points to 16.5-18.5% this fiscal, thanks to softening power, fuel, and freight costs, which constitute about 50% of the total production cost. This rebound in profitability follows a contraction last fiscal due to higher petcoke and coal prices.

Looking ahead to the next fiscal year, demand growth is expected to moderate to 4-6%, with a slight uptick in prices to Rs 400-405 per 50 kg bag, reflecting the industry's resilience and adaptability in the face of changing market dynamics.

Source: Economic Times Realty