The Indian cement industry is poised for a significant expansion, with major players investing a substantial sum of Rs 1.25 lakh crore in capital expenditure over the next three fiscal years. This investment is driven by the robust demand for cement and the industry’s strategic pursuit of increased market share. According to a report by CRISIL, the planned capex is 1.8 times higher than the capital expenditure recorded in the previous three years.
Despite this surge in investment, the credit profiles of cement manufacturers are expected to remain stable. The industry’s relatively low capital expenditure intensity and the strong balance sheets of the companies are key factors contributing to this stability. CRISIL Ratings anticipates that the credit risk profiles of cement companies will remain unaffected due to their continued low capex intensity, which is projected to stay within the range of 0.7 to 0.9 times during FY25-27. This stability is underpinned by a decade-high cement utilization rate of 70% in FY24, driven by a 10% annualized increase in cement demand over the past three fiscal years.
The analysis covers 20 major cement manufacturers, representing over 80% of the industry’s installed grinding capacity. Manish Gupta, Senior Director and Deputy Chief Ratings Officer at CRISIL, expressed optimism about the cement demand outlook, projecting a compound annual growth rate of 7% from FY25 to FY29. The forthcoming investment will not only meet the growing demand but also bolster the national presence of key players. UltraTech Cement, a subsidiary of the Aditya Birla Group, is leading the industry with an installed capacity exceeding 150 million tonnes. The company aims to further expand its capacity to over 200 million tonnes annually.
The Adani Group, through its subsidiaries Ambuja Cements and ACC, has also made significant investments in the cement industry. The recent acquisition of Penna Cement has added 14 million tonnes to Adani’s capacity, bringing its total to 93 million tonnes. The cement industry’s expansion plans reflect the positive outlook for India’s construction sector and the overall economic growth. As the country continues to urbanize and develop infrastructure, the demand for cement is expected to remain strong, driving further investments and growth in the industry.
