The Indian cement industry’s growth forecast for FY25 has been revised down to 4-5% (445-450 MT), primarily due to sluggish construction activity in the housing and infrastructure sectors, according to ICRA. The initial estimate in July was 7-8%, expecting demand to rise in H2, but a slower-than-expected post-election recovery has affected projections.
Key Drivers and Challenges
Muted Volumes: Cement volumes grew just 2% YoY to 212 MT in H1 FY25, impacted by election-related slowdowns and heavy monsoon rains.
Rural Demand: A robust rabi season backed by healthy monsoons and strong farm cash flows is expected to improve rural housing demand in H2.
Urban and Infrastructure Boost: Urban housing demand remains strong, while increased government capital spending in H2 FY25 (from ?4 lakh crore in H1 to meet a full-year target of ?11.1 lakh crore) should spur infrastructure activity and cement demand.
Pricing and Margins
Cement prices fell 10% YoY to ?330 per bag in H1 FY25 due to oversupply and subdued demand, affecting revenue realisation.
Operating profit margins dropped to 12% in Q2 FY25, a 375 bps decline YoY, despite reduced coal and pet coke costs (down 38% and 13% YoY, respectively).
Capacity Expansion
The industry is expected to add 70-75 MT capacity during FY25-26, with 33-37 MT as clinker capacity.
Regional Growth: Eastern and southern regions will lead capacity additions, contributing 38-40 MT evenly split over two years.
Utilisation: Capacity utilisation is projected to rise slightly to 71% in FY25 from 70% in FY24.
Outlook
The cement sector is poised for a recovery in H2 FY25, driven by rural and urban housing demand and higher government spending. However, pricing pressures and oversupply remain challenges. Total installed capacity stands at 690 MT, with moderate utilisation rates indicating room for demand-driven growth.
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