According to a recent CRISIL report, Indian cement manufacturers are set to invest approximately $14.89 billion (Rs. 1.25 trillion) in expanding their capacity between FY25 and FY27. This surge in investment is fueled by a robust demand forecast and competitive pressures to capture greater market share. The planned capital expenditure (capex) will be 1.8 times greater than that of the previous three fiscal years. Despite this significant outlay, the credit risk profiles of these manufacturers are expected to remain stable, thanks to their relatively low capex intensity and solid financial health, with financial leverage expected to stay below 1 times, bolstered by strong profitability.
CRISIL’s analysis of 20 major cement companies, which account for over 80% of the industry’s cement grinding capacity as of March, reveals that more than 80% of the upcoming capex will likely be covered through operating cash flows, reducing the need for additional debt. Mr. Ankit Kedia, Director at CRISIL Ratings, pointed out that the existing cash reserves and liquid investments totaling over $4.77 billion (Rs. 40,000 crore) will provide a buffer against any delays in implementation. The report also observed a 10% annual increase in cement demand over the past three fiscal years, which has outpaced capacity growth and driven utilisation rates to a decade-high of 70% in FY24. Looking forward, Mr. Manish Gupta, Senior Director and Deputy Chief Ratings Officer at CRISIL Ratings, anticipates a continued positive demand outlook, projecting a 7% compound annual growth rate from FY25 to FY29 and the addition of 130 million tonnes (MT) of cement grinding capacity, nearly a quarter of the current capacity, during this period.
