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.
With a compound annual growth rate of 7% for the fiscal years 2025–2029, the cement demand prognosis is still favorable, according to Manish Gupta, senior director and deputy chief ratings officer at Crisil Ratings.
The increase in capital expenditure over the next three fiscal years will mainly address this expanding demand as well as the goals of the cement manufacturers to strengthen their position in the country.
Gupta stated that “players are likely to add a total of 130 million tonne (MT) of cement grinding capacity (nearly a fourth of the existing capacity) over this period.”
According to the government, the eight key industries—which include industries like coal, cement, steel, and electricity—saw a 4% increase in June of this year when compared to the same month the previous year.
According to the report, over the last three fiscal years, the demand for cement has grown at a robust rate of 10% annually, outpacing the growth in capacity addition. This has caused the level of utilisation to reach a decadal high of 70% in the fiscal year 2024, which has prompted manufacturers to raise their capital expenditures.
The low capital expenditure intensity will maintain firms’ robust balance sheets and stable credit profiles, according to Ankit Kedia, Director of Crisil Ratings.
More than 80% of the estimated capital expenditures for the three fiscal years ending in 2027 are probably going to come from operational cash flows, meaning that extra debt will not be needed too much.
Furthermore, approximately Rs 40,000 crore in liquid and cash investments now on hand will act as a buffer in the event that implementation-related delays arise, according to Kedia.
