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Rating agency ICRA in its latest report has said that the revenues of cement companies are estimated to increase by 12-14% in FY2023, supported by volumetric growth as well as higher realisations. However, it said the elevated input costs, primarily power and fuel, raw material and freight charges, are likely to exert pressure on OPBIDTA, with a decline of 26-30% to Rs. 775-825/MT in FY2023. Consequently, it said the operating margins of cement companies are estimated to contract by 600-690 bps to around 13.9-14.8% in FY2023. However, it said driven by the expected easing of the cost side pressures, primarily on power and fuel costs, the operating margins are likely to increase by 200-240 bps in FY2024.

ICRA expects the capacity additions to increase to around 30-33 MTPA in FY2023 and 33-36 MTPA in FY2024 from around 25 MTPA in FY2022. Nonetheless, it said despite an expected increase in demand in FY2023 and FY2024, the utilisation levels are likely to remain moderate at around 68-69%, on an expanded base. Given the moderation in earnings, it said the debt dependence is to be higher to fund the ongoing capex, which is likely to moderate the leverage and coverage in FY2023 and FY2024.

The report further said the all-India cement volumes increased by 11% YoY at 248 million MT in 8M FY2023 supported by continued strong demand from rural housing and pick-up in infrastructure activity. It added that cement volumes are expected to grow by 8% in FY2023 to around 389 million MT (16% higher than pre-Covid levels of 334 million MT in FY2020) and by 7% in FY2024 to around 416 million MT.