According to a Crisil research study issued on Tuesday, India’s cement business would add 150-160 million tonnes per year (MTPA) capacity through both organic and inorganic methods by FY28. 

According to the research, growing demand in industries such as infrastructure and housing will drive growth forward.

In FY25, demand is predicted to expand by 4-6% on a high base of the previous three fiscals. Rising raw material costs and a flat base would lead to a price increase of 1-3% to ₹400-₹405 per 50 kg bag, according to the research.

Over the previous five fiscal years, the sector increased 119 MTPA capacity to a total of 595 MTPA.

According to the estimate, up to 70-75 MT of capacity expansion is scheduled to be commissioned next fiscal year, with 50-55% concentrated in the eastern and central areas. Large players will account for about half (50-55%) of the planned capacity addition.

Robust demand in the past two fiscals has bolstered the balance sheets of large players and some mid-sized ones with strong market presence, prompting them to expand capacity on the back of healthy cash accrual and credit profile,” Crisil, a research and rating agency, said in its analysis on the market. 

Demand for FY24 is expected to increase by 10-12 percent, spurred by the government’s aim for affordable housing and pre-election infrastructure expenditure.

Price rise would be limited to 0-1% due to increased supply and competition. Prices will remain at ₹390-₹395 per 50-kilogram bag. The utilization rate among cement manufacturers will be 70-75%. 

According to Miren Lodha, Director-Research, CRISIL Market Intelligence, and Analytics, cement prices fell moderately by 1% from April to December 2023, reversing a four-year upward trend. 

With cement makers adding 35-40 MTPA of capacity this fiscal, the highest in more than a decade, and acquired capacities being ramped up, a significant increase in supply would test market discipline and restrict the increase in prices to only 0-1 percent,” he said. 

CRISIL Research anticipates a 13-15 percent reduction in power and fuel expenses this fiscal year as crude oil and coal prices fall. 

Prices for pet coke and imported non-coking coal, which are major fuels used in cement production, have fallen by 30% and 50% year on year, respectively. 

Freight spending is also predicted to fall 0-2% owing to increased volume and lower diesel prices.

The capacity share of major players climbed from 45 to 48 percent.

A slew of mergers and acquisitions in the sector over this period resulted in a transfer of 110-115 MTPA capacity, with large players acquiring 43-45 MTPA.” Furthermore, the study said that their organic capacity expansion was between 50 and 52 MTPA. 

The pace of consolidation has quickened this fiscal year, with more than 20 MTPA of capacity bought between April and December 2023, it noted.