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Credit rating agency Crisil in its latest report has said that cement companies are expected to go on an expansion spree, and add 145-155 MT capacity between FY 2023 and 2027. That translates to a 4-5 per cent compound annual growth rate on a high base. A robust 6-7 per cent CAGR expected in demand over these five fiscals will encourage the growth in supply. The expected 145-155 MT of fresh capacity addition will entail a likely capex of Rs 1.2 lakh crore, with large producers accounting for more than half of the spending.

According to the report, with 570 MT of installed capacity, India is the world's second-largest cement producer after China. Between FY12 and FY23, the installed capacity grew by a whopping 61 per cent to 570 MT from 353 MT in FY12 -- a net addition of 217 MT from 2013 to 2022 -- and FY22 saw the highest capacity addition of 34 MT. It further said cement makers have been adding substantial capacity in the past too. In the five fiscals through 2017, around 108 MT were added, while in the next five fiscals through 2022, 109 MT were added despite pandemic-induced disruptions. On the balance-sheet side, healthy post-pandemic demand recovery and strong profitability helped producers deleverage. Capex plans, which were on hold or delayed due to the pandemic, restarted in the latter half of fiscal 2021. 

However, the agency expects the capacity addition drive to peter off fiscal 2023 and moderate to 30-32 MT, inclusive of grinding and integrated units, as higher input cost has hit their profitability, leading to slowing capex. And fiscal 2024 also looks tepid with an addition of only 30-32 MT. That is because policies may change because of general elections. But once the hustings are over, the agency expects capacity addition to gather pace, supported by the rising demand amid a growing population and the government's infrastructure thrust.