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Rating agency CRISIL in its latest report has said that the Indian cement industry has lined up a capital expenditure (capex) of around Rs 1.25 lakh crore for FY25 to FY27 to meet the growing demand. During this period, the industry is expected to add 130 million tonne of cement grinding capacity, which is a fifth of the existing capacity. It said the investment will be driven by healthy demand outlook and the quest for market share, and the low capex intensity and strong balance sheets will keep the credit profiles of the companies stable.

According to the report, the projected outlay will be 1.8 times the capex during the past three fiscals, yet the credit risk profiles of manufacturers will remain stable. This is owing to their continued low capex intensity and solid balance sheets with financial leverage sustaining below 1x on the back of strong profitability. A healthy 10 per cent annualised increase in cement demand in the past three fiscals outpaced growth in capacity addition, pushing the utilisation level to a decadal high of 70 per cent in FY24. This has prompted the cement manufacturers ‘to press the capex pedal’. 

Over the credit profiles, the report said CRISIL Ratings-rated cement manufacturers will remain stable because capex intensity of the cement industry is still low and likely to remain range-bound at 0.7-0.9 time during fiscal 2025-2027, which is similar to that in the past three fiscals. It said the findings are based on an analysis of 20 cement makers, accounting for over 80 per cent of the industry's installed cement grinding capacity as of March 31, 2024.