New Delhi: A report from CRISIL stated that the Indian cement sector plans to invest approximately Rs 1.25 lakh crore for the financial years 2025 to 2027 in order to fulfill the increasing demand. Throughout this time frame, the industry is projected to increase its cement grinding capacity by 130 million tonnes, representing one fifth of the current capacity. The report stated that the companies' stable credit profiles will be maintained due to low capex intensity and strong balance sheets, driven by a healthy demand outlook and the pursuit of market share.
Manufacturers' credit risk profiles will stay stable despite the projected outlay being 1.8 times higher than the capex in the past three fiscal years. This is because of their consistent low capex intensity and strong balance sheets, with financial leverage staying below 1x due to high profitability," it stated.
In the last three fiscal years, there has been a consistent and robust 10 per cent annual growth in cement demand, which has exceeded the rate of capacity expansion. This has resulted in the utilization level reaching a ten-year high of 70 per cent in FY24. This has led the cement producers to increase their capital expenditure, the statement added.
According to the report, credit ratings for cement companies rated by CRISIL Ratings are expected to stay stable due to the low capex intensity in the industry, projected to remain at 0.7-0.9 times from fiscal years 2025-2027, similar to the previous three fiscal years. The results were obtained by studying 20 cement manufacturers, which represent more than 80 percent of the industry's total cement grinding capacity as of March 31, 2024, it stated.
The forecast for cement demand looks strong, with a 7 per cent compound annual growth rate expected for the years 2025-2029. CRISIL Ratings Senior Director and Deputy Chief Ratings Officer Manish Gupta stated that the increase in capital expenditure over the next three fiscal years will mainly address the increasing demand and the cement makers' desire to enhance their national footprint.
The Cement Manufacturers' Association (CMA) reports that the total cement capacity in India is 670 million metric tons (MT). Aditya Birla group's UltraTech leads the industry with over 150 MT in installed capacity and aims to surpass 200 MT per year with continuous expansion and acquisitions. The Adani Group, led by Gautam Adani, ranks as the second biggest player and aims to reach a capacity of 140 MTPA by FY28.
With its Ambuja Cements, the company also has ownership of ACC, Sanghi Industries, and MyHome Industries. It recently revealed the purchase of Hyderabad's Penna Cement for Rs 10,422 crore, increasing its capacity to 93 MTPA with an additional 14 MTPA. Additionally, Shree Cement, Dalmia Bharat, JK Cement, and other cement manufacturers have also declared plans for expansion.
Consolidation is happening in the cement industry with the top five companies holding around 54 pc of the market share in FY24, including UltraTech Cement, Shree Cement, Ambuja Cement (including ACC Ltd), Dalmia Bharath, and Nuvoco Vistas.
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