Key Points

growth follows a solid 6.3 per cent increase in cement volumes during FY2025, the report added.

Despite global economic uncertainties, ICRA anticipates significant capacity additions in the cement sector, with projections for 43-45 million metric tons per annum (MTPA) in FY2026, up from 32-35 million MTPA in FY2025.

The agency has maintained a stable outlook for the industry, reflecting its confidence in the sector's continued growth.

In the first half of FY2025, cement volumes grew by a modest 1.7 per cent year-on-year to approximately 212 million MT.

This slow growth was primarily attributed to external factors such as the General Elections, extended monsoons, and a broader slowdown in private capital expenditure.

However, the second half of FY2025 saw a robust recovery, with volumes increasing by 10.7 per cent year-on-year to around 241 million MT, driven by a pickup in construction activity.

The demand for cement remains healthy, and large cement manufacturers are responding by expanding their production capacities through both organic and inorganic means to strengthen their market positions.

Giving more insights, Abhishek Lahoti, Assistant Vice President and Sector Head, Corporate Ratings, ICRA, said: "Backed by healthy demand, ICRA foresees a capacity addition in the cement industry of 43-45 million MTPA in FY2026, rising from the estimated addition of 32-35 million MTPA in FY2025."

"During FY2026, eastern and northern India are likely to lead the grinding capacity supply, together adding 22-24 million MTPA, largely equally split between the two regions," he said.

Lahoti said that the southern region, despite an oversupply of capacity, is experiencing significant capacity additions by large cement companies as it is operating at optimal utilisation levels and intend to maintain its market share in the near term.

"Overall, the industry's capacity utilisation is likely to remain stable at 70 per cent in FY2026, similar to FY2025, on an expanded base," he added.

The cement prices have shown some signs of recovery from Q3 onwards with pick-up in demand, after witnessing 10 per cent decline in average realisation during H1 FY2025. While lower realisation has impacted profitability during FY2025, moderation in costs of coal and pet-coke, which declined by 23 per cent and 13 per cent YoY, respectively, provided some respite to cement companies in the interim.

"The credit profile of cement producers, especially of larger and mid-size companies, is expected to remain stable, driven by a healthy growth in operating income, expected improvement in operating margins and comfortable leverage metrics. However, smaller players will witness pressure on their credit profile in the backdrop of moderation in operating profitability. Consolidation in Indian cement industry has constrained pricing flexibility of small/regional players, which will weigh on their profitability in the medium term" Lahoti added.

- ANI