IGI Logo

Event: In the Independence address to the nation on Aug 15, 2025, our honorable PM Shri Narendra Modi announced a potential rationalisation (reduction) of GST rates during Diwali 2025. A couple of hours later, a Ministry of Finance press release envisaged the idea of a simplified GST regime with 2 slabs – standard and merit, while there would be special rates only on a few demerit goods. Apart from simplification, the objective of the rationalisation exercise is also to boost affordability and consumption

GST rate on Cement has, ever since the introduction of the GST regime, been held at 28%, while other construction inputs – like metals, tiles, etc carry a rate of 18%. While it is still not certain, there is a potential possibility that Cement may be moved to the 18% bracket.

Impact: In such an event, we see three impacts on the sector: 1) Increased consumption, which would gradually also improve capacity utilization, 2) Pricing power to improve for the sector, and 3) Operating leverage benefit for the companies at varying degrees due to higher volumes. We estimate cement industry demand for FY27/28E to spike from a 6-8% range to ~8-10% range on an 18% GST rate. At the same time, we also expect a pricing tailwind of ~INR60/100 per ton each in FY27/28E.

Key Beneficiaries: Consequently, we expect EBITDA/t for the Cement companies under our coverage to increase in the range of 15-25% in FY27/28E. In % terms, the biggest 4 beneficiaries could be ACC, BCORP, JKLC, and NUVOCO.

We continue to maintain our positive stance on the sector with our Top Picks being NUVOCO and JKLC. We have Buy/ADD/SELL ratings on 8/1/2 companies respectively.

With higher demand, realisation too is expected to improve gradually

Cement, being an essential commodity for housing and infrastructure, has historically exhibited low pricing elasticity. A meaningful GST reduction now acts as a catalyst, improving consumer sentiment and driving affordability in the sector. This positive shift supports volume growth, increases capacity utilisation for the sector and gradually takes cement prices higher. We conservatively forecast a realization tailwind of 1.0%/1.9% in FY27/28E for companies, as we show in exhibit below

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer
SEBI Registration no.: INZ 000160131