IGI Logo

Credit rating agency ICRA in its latest report has said that cement volumes are likely to rise by a healthy 9-10% in FY2024 supported by demand from infrastructure and urban housing sectors. In H1 FY2024, the volumes increased by 11-12% YoY. Nevertheless, it said the below normal monsoons could impact the overall crop output in 2023, adversely impacting farm incomes and demand for rural housing in some markets. Moreover, it said with the upcoming State Elections the release of funds towards ongoing infra projects may slow down, posing some downside risks to cement volume off-take in H2 FY2024. The cement prices in FY2024 are expected to sustain at previous-year levels. ICRA’s outlook on the cement sector is Stable.

According to the report, the increasing focus on green power is likely to lower the cement industry’s dependence on high-cost thermal power and grid for power requirements, thereby reducing the operating costs. Assuming thermal power cost at Rs 6.5 /unit, waste heat recovery system (WHRS) power cost at Rs 0.75 /unit and solar power cost at Rs 4.5/unit, a 25% replacement of thermal power consumption by green power could lead to cost savings of around 15-18%, while also reducing the carbon footprint.

The report said supported by healthy demand prospects, the capacity addition in the cement industry is estimated at 63-70 million MT during FY2024-FY2025, of which around 33-37 million MT will be added in FY2024 (FY 2023: 27 MTPA) the highest addition in the last five years. The eastern and central regions are expected to lead the expansion.