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 Driven by healthy demand outlook and quest for market share, cement makers in the country are projected to undertake capital expenditure (capex) worth Rs 1,25,000 crore over fiscals 2025-2027, a report showed on Thursday. 

According to a Crisil Ratings analysis of 20 cement makers, accounting for over 80 per cent of the industry’s installed cement grinding capacity (as on March 31), 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 due to their continued low capex intensity and solid balance sheets with financial leverage sustaining below 1x on the back of strong profitability, said the report.

Cement demand outlook remains healthy with a compound annual growth rate of 7 per cent over fiscals 2025-2029, said Manish Gupta, senior director and deputy chief ratings officer, Crisil Ratings.

The surge in capex over the next three fiscals will primarily cater to this growing demand as well as to the aspirations of the cement makers to improve their national presence.

“A total of 130 million tonne (MT) of cement grinding capacity (nearly a fourth of the existing capacity) is likely to be added by players over this period,” informed Gupta.

The eight core industries that include sectors such as coal, cement, steel and electricity posted a 4 per cent growth in June this year compared to the same month of the previous year, according to the government.

The report mentioned that a healthy 10 per cent annualised increase in cement demand in the past three fiscals outpaced growth in capacity addition, pushing utilisation level to a decadal high of 70 per cent in fiscal 2024 and prompting manufacturers to press the capex pedal.

According to Ankit Kedia, Director, Crisil Ratings, the low capex intensity will keep the balance sheets of manufacturers strong and ensure stable credit profiles.

Over 80 per cent of the projected capex over the three fiscals through 2027 is likely to be funded through operating cash flows, resulting in minimal requirement of additional debt.

“Moreover, existing cash and liquid investments of over Rs 40,000 crore will provide a cushion in case of implementation-related delays,” Kedia noted.