August 23rd: India’s cement industry is preparing for a significant expansion, with a planned capital expenditure (capex) of approximately ₹1.25 lakh crore from FY25 to FY27, according to a report by CRISIL Ratings. This surge in investment aims to meet rising demand and boost production capacity, with an expected addition of 130 million tonnes of cement grinding capacity, representing nearly 20% of the current capacity.
The industry’s expansion plans are driven by strong demand projections, the quest for market dominance, and sustained profitability. Despite the large capex, the report forecasts that cement manufacturers’ credit profiles will remain stable. This is attributed to the relatively low capex intensity and strong balance sheets maintained by leading companies. Financial leverage across the sector is expected to stay below 1x, supported by consistent profitability.
Demand Surge and Utilization Levels
The cement sector has witnessed an annualized demand increase of 10% over the past three years, outpacing the rate of capacity expansion. This has pushed capacity utilization to a decade-high level of 70% in FY24, compelling manufacturers to increase their investment in expanding facilities.
CRISIL noted that despite a planned capex nearly 1.8 times greater than in the previous three years, the industry’s low capex intensity, forecasted at 0.7-0.9x for FY25-FY27, is expected to keep credit risk profiles stable. The analysis covered 20 major cement manufacturers, representing over 80% of India’s installed cement grinding capacity as of March 2024.
Market Leaders Drive Expansion
The Indian cement industry is led by several major players that are actively expanding their capacities. UltraTech Cement, part of the Aditya Birla Group, leads the sector with an installed capacity exceeding 150 million tonnes per annum (MTPA). UltraTech aims to expand this capacity to over 200 MTPA through ongoing projects and acquisitions. The Adani Group, the second-largest player in the sector, has set a target of reaching 140 MTPA by FY28. The group, through its subsidiaries Ambuja Cements, ACC, and Sanghi Industries, is aggressively expanding its footprint, including the recent acquisition of Penna Cement, which will add an additional 14 MTPA to its capacity.
Other major firms, including Shree Cement, Dalmia Bharat, and JK Cement, have also announced significant expansion plans, reflecting the broader industry’s drive for growth.
Consolidation and Market Share
The cement industry is seeing increased consolidation, with the top five companies—UltraTech Cement, Shree Cement, Ambuja Cement (including ACC), Dalmia Bharat, and Nuvoco Vistas—accounting for around 54% of the total market share in FY24. This consolidation trend is expected to continue as larger firms pursue acquisitions and capacity expansions to strengthen their national presence.
The Cement Manufacturers’ Association (CMA) reported that India’s total installed cement capacity stands at 670 MTPA. With planned expansions across the sector, India’s cement production capacity is poised for robust growth to meet the demands of infrastructure projects and real estate development.
