Cement Demand in India to Grow 6.5-7.5% in FY26: CRISIL
India’s cement demand is projected to rebound to 6.5–7.5% in FY26, recovering from ~5% growth in the previous fiscal, according to a CRISIL analysis of 17 major cement companies that account for over 85% of domestic sales. The growth slowdown last fiscal was primarily due to weak construction activity in H1, impacted by the general elections and erratic monsoon, though demand picked up in H2.
The demand revival, along with improved realisations, is expected to boost operating profitability by around ₹100 per tonne—pushing it slightly above the decadal average. Strong accruals and healthy balance sheets will help cement players maintain stable credit profiles despite continued capital expenditure.
Says Sehul Bhatt, Director, Crisil Intelligence, “This fiscal, cement demand will be driven by a 7-8% growth in the rural housing segment, which accounts for a third of domestic demand. Indeed, rural housing demand will replace the infrastructure segment as the primary demand driver this fiscal, owing to expectations of a rise in agricultural income due to a likely healthy monsoon. Higher disposable income, on account of lower interest rates and tax cuts, as well as benign inflation, will also support rural housing demand.”
On its part, the infrastructure segment—the second-largest contributor to cement demand with ~30% share—is expected to grow at a relatively slow but steady pace, owing to lower awarding of national highway projects in the previous two fiscals and muted capital outlay growth for railways.
Meanwhile, cement prices witnessed a healthy uptick in the first quarter of the current fiscal and are expected to rise 2-4% this fiscal after two consecutive years of a price lull.
Says Anand Kulkarni, Director, Crisil Ratings, “Along with higher demand, a recovery in realisations, amid stable costs, will lift the operating profitability of cement makers to ₹975–1,000 per tonne this fiscal, against ~₹880 per tonne last fiscal and the decadal average of ~₹965 per tonne. An increasing proportion of competitively sourced green energy in the power mix will lead to some savings in power and fuel costs. This will support profitability by offsetting the ₹20–30 per tonne rise in raw material prices due to higher costs of limestone, fly ash, and slag.”
The resultant increase in cash accrual will reduce reliance on external borrowings to fund capital expenditure. Accordingly, the net debt-to-Ebitda multiple is estimated to decline from a five-year peak of 1.3 times in fiscal 2025 to 1.0–1.2 times this fiscal, keeping credit profiles stable.
That said, an extended monsoon impacting construction activity or lower infrastructure spending, which can affect demand, and any adverse movement in commodity and energy prices owing to global geopolitical tensions, which may dent profitability, will bear watching.
