FCC

Icra Sees 80–85 MT Cement Capacity Boost in Two Years

2025-07-03

India’s cement industry is poised for its biggest expansion in years, with new capacity of 80–85 million metric tonnes (MT) scheduled over the next two financial years, a report by Icra shows. Production is forecast to reach 480–485 MT in FY2026—an increase of 6–7 per cent year on year—after climbing 6.3 per cent to 453 MT in FY2025, thanks to solid demand from housing and government led infrastructure projects.

Icra expects 40–42 MT of fresh capacity to come on line in FY2026, up from 31 MT in FY2025. The eastern region will lead the way, adding about 14–15 MT of grinding capacity. Even with the build out, utilisation is likely to hover near 70 per cent, given the higher production base.

Average pan India cement prices eased to roughly Rs 340 per 50 kg bag in FY2025 from Rs 365 the year before, reflecting subdued demand in the first half. Producers lifted prices by 4–5 per cent in the second half, and Icra sees a further rise of 3–5 per cent in FY2026. Input costs should remain broadly stable, although swings in petcoke and freight—both tied to global crude oil—are a key risk.

Operating margins are projected to improve by 80–150 basis points to 16.3–17.0 per cent in FY2026. For Icra’s sample of large companies, operating profit before interest, tax, depreciation and amortisation (OPBITDA) per tonne is expected to grow 10–14 per cent to Rs 880–920. Revenue for these majors is set to rise 12–14 per cent, driven by 8–9 per cent volume growth and firmer prices.

Despite hefty capital expenditure plans, sector wide debt is likely to decline 7–8 per cent in FY2026 as big players continue repayments and prepayments. As a result, leverage (total debt to OPBITDA) should improve to 1.2–1.3 times, while debt service coverage (DSCR) strengthens to about 3.4–3.5 times. Large firms such as UltraTech Cement, ACC, Ambuja Cements, Shree Cement, Dalmia Bharat, JK Cement and Ramco Cements are expected to outperform on revenue and profitability metrics, while smaller producers may struggle with margins and capital needs amid price volatility.