ICRA anticipates a robust 7-8 per cent year-on-year (YoY) increase in cement volumes for FY2025, fueled by steady demand from the infrastructure and housing sectors. However, growth in Q1 FY2025 was modest at 2-3 per cent YoY, attributed to a slowdown in construction activity due to the General Elections. Despite this, the Government's emphasis on infrastructure projects, additional housing approvals under the Pradhan Mantri Awas Yojana (PMAY), and industrial capital expenditure are expected to significantly boost cement volume offtake in H2 FY2025.
Anupama Reddy, Vice President and Co-Group Head, Corporate Ratings, ICRA, provided further insights: "ICRA’s sample set is expected to see an operating income increase of 7-8 per cent YoY in FY2025, driven mainly by volumetric growth. While cement prices are projected to remain stable, reduced cost pressures—especially in power and fuel—and a growing focus on green power are likely to improve OPBITDA/MT by 1-3 per cent YoY to Rs. 975-1,000/MT."
ICRA forecasts green power to make up 40-42 per cent of the total power mix by March 2025, up from about 35 per cent in March 2023, for the cement companies in its sample set. Major cement players aim to cut emissions by 15-17 per cent over the next 8-10 years by increasing the use of blended cement, which requires less clinker and fuel, and boosting green power consumption through solar, wind, and waste heat recovery systems (WHRS).
Reddy added, "ICRA estimates capacity additions in the cement industry to be 63-70 million MT during FY2025-FY2026, with around 33-35 million MT added in FY2025 (FY2024: 32 million MT), driven by healthy demand. The eastern and southern regions are expected to lead this expansion. Capacity utilisation is projected to rise to 71 per cent in FY2025 from 70 per cent in FY2024, supported by higher cement volumes. Despite high debt dependence for ongoing capital expenditure, ICRA expects the credit profile of cement producers to remain stable due to healthy growth in operating income, anticipated margin improvements, and comfortable leverage and coverage metrics."
ICRA also notes that while organic growth is expected to persist in the medium term, cement companies are increasingly opting for inorganic expansion to rapidly increase capacities. The market share of the top five cement companies surged to 54 per cent as of March 2024 from 45 per cent in March 2015, with projections suggesting it will rise to 58-59 per cent by March 2026, indicating further consolidation in the cement industry.
_20240706114748_original_image_25.webp)
