Cement demand likely to moderate to mid-single-digit levels in FY27: Ind-Ra
India Ratings and Research (Ind-Ra) in its latest report has said that cement demand is likely to moderate to mid-single-digit levels in FY27 from about 8 per cent in FY26 amid inflationary pressures and the possibility of an El Nino weather event. However, it stated the sector is likely to witness nearly 100 million tonnes (MT) of capacity additions in FY26, with utilisation levels estimated at 68-69 per cent in FY27. It mentioned ‘While the sector will witness a significant input cost inflation given the increase in fuel costs, the moderate demand environment, coupled with continued capacity additions, can restrict the increase in cement realisations to low-to-mid single digits.’
Moreover, it said ‘With only a partial pass-through of input cost increase, the EBITDA/MT could decline around 15 per cent year-on-year, after a similar recovery in FY26’. It added that this will impact small companies (tier-2 players) more. Large Tier 1 players have adequate balance sheet headroom and financial flexibility to absorb the impact without impacting the credit profile, but tier-2 players could witness stress, given their concentrated geographical presence and limited financial headroom. This will also create potential inorganic expansion opportunities in the cement sector, which is already witnessing consolidation.
Further, it said ‘the pace of sector consolidation could taper as players concentrate on ramping up acquired assets and executing announced capex.’ It stated that competitive intensity in the sector is expected to stay elevated in the near term, although early signs of capital expenditure rationalisation by some leading players are a positive development for the industry. Demand for cement from the infrastructure sector is expected to be supported by stronger growth in central government capex and continued growth in state capex, although execution of the budgeted capex in the current environment will be a critical factor. Furthermore, it said ‘On the housing side, rural demand is likely to be supported by factors like real wage growth, goods and services tax (GST) cut and the welfare schemes of state governments. Besides, it has maintained a stable rating outlook on its rated cement portfolio for FY27.
