ICRA Projects 7-8% YoY Growth in Cement Volumes for FY2025

ICRA forecasts a healthy 7-8% year-on-year growth in cement volumes for FY2025, driven by robust demand from the infrastructure and housing sectors. While Q1 FY2025 growth was muted at 2-3% YoY due to a slowdown in construction activities caused by the General Elections, a significant pickup is expected in H2 FY2025 due to the Government's focus on infrastructure projects, additional housing under the Pradhan Mantri Awas Yojana (PMAY), and industrial capex.

Anupama Reddy, Vice President and Co-Group Head of Corporate Ratings at ICRA, commented, "The operating income for ICRA’s sample set is expected to expand by 7-8% YoY in FY2025, driven primarily by volumetric growth. Cement prices are projected to remain stable, while a reduction in power and fuel costs, along with increased green power usage, is likely to improve OPBITDA/MT by 1-3% YoY to ₹975-1,000/MT."

ICRA projects that green power will account for 40-42% of the total power mix by March 2025, up from around 35% in March 2023. Major cement players aim to reduce emissions by 15-17% over the next 8-10 years through increased use of blended cement and green power sources such as solar, wind, and waste heat recovery systems (WHRS).

Additionally, ICRA anticipates a capacity addition of 63-70 million MT in the cement industry during FY2025-FY2026, with around 33-35 million MT added in FY2025. The eastern and southern regions are expected to lead this expansion. Capacity utilization is projected to rise to 71% in FY2025 from 70% in FY2024, supported by higher cement volumes.

Despite the high debt dependence to fund ongoing capex programs, ICRA expects the credit profile of cement producers to remain stable, driven by healthy growth in operating income, improved operating margins, and comfortable leverage and coverage metrics.

ICRA also notes a trend towards inorganic growth, with the market share of the top five cement companies increasing from 45% in March 2015 to 54% in March 2024, and projected to reach 58-59% by March 2026, indicating further consolidation in the industry.