Cement Industry Eyes Growth in 2025 Despite Challenges
The Indian cement industry is gearing up for improved growth in 2025, as major players look to capitalise on the expected acceleration in demand and higher margins. With hopes pinned on government spending on large-scale infrastructure projects, the industry is targeting an 8% sales growth, bolstered by increased demand for housing and public infrastructure. The consolidation within the industry, driven by acquisitions by prominent corporate houses, is also expected to support this growth trajectory.
In a notable shift, two key players in the sector, UltraTech Cement, part of the Aditya Birla Group, and Ambuja Cements, led by billionaire Gautam Adani, have made significant strides in acquiring smaller cement companies, along with expanding their existing units. These acquisitions amount to more than 50 million tonnes per annum (MTPA) of cement capacity, valued at approximately USD 4.5 billion. With both firms fortifying their positions, their combined efforts are likely to further consolidate the sector’s competitive dynamics. The year 2024 saw challenges for the cement industry, marked by moderate capacity utilisation and lower sales realisations, which negatively impacted topline growth, narrowed margins, and slowed volume growth. Despite these hurdles, the year will be remembered for major acquisitions that have positioned UltraTech and Adani Cement for long-term growth.
Adani Cement, a relatively new entrant, acquired several cement firms, including Saurashtra-based Sanghi Industries, Penna Industries, and Orient Cement. These acquisitions enabled Adani Cement to surpass 100 MTPA of capacity within just two years of entering the sector. This rapid expansion is part of the group’s strategy to increase its cement capacity to 140 MTPA by FY28, nearly reaching the scale of market leader UltraTech Cement, which currently holds 156.66 MTPA of grey cement capacity. UltraTech Cement is also on a robust growth path, with plans to scale up its capacity to 200 MTPA by FY27. In 2024, it completed the acquisition of India Cements Ltd and is in the process of acquiring Kesoram Industries’ Cement Business.
According to Rakesh Surana, Partner at Deloitte India, 2024 has been a year of significant consolidation for the cement industry, resulting in the top five producers commanding nearly 60-65% of the industry’s total capacity. This trend highlights the structural shift towards larger, more powerful cement conglomerates. However, the industry faced muted volume growth in FY25, expected to be just 4-5%, down from the over 10% growth seen in the past three years. Factors such as the extended monsoon season and the election period contributed to the slowdown, causing a decline in price realisations by up to 10% year-on-year. The outlook for FY2025, however, appears promising, with expectations of a 7-8% growth in demand for cement, driven by rural consumption, healthy urban housing demand, and increased government spending on infrastructure projects. The cement sector is also poised to add an estimated 35 MTPA of capacity in the near future.
Industry analysts predict a 4-5% YoY growth in cement volumes, expecting the total volume to reach 445-450 million metric tonnes in FY2025. As demand picks up in the second half of FY2025, particularly in rural areas, the cement industry is expected to show resilience, supported by government infrastructure plans and stronger private sector capital expenditure. Despite the challenges faced in 2024, the cement industry remains optimistic about its future, anticipating a gradual recovery in 2025 as demand picks up and capacity utilisation improves.
