India’s Cement Capacity Addition To See 75% Jump Over Fiscals 2026-28: CRISIL

The domestic cement industry is poised for an expansion spree, with grinding capacity of 160-170 million tonne (MT) expected to be added between fiscals 2026 and 2028, up sharply compared with the 95 MT added in the past three fiscals. This is primarily fueled by healthy demand outlook and high capacity utilisation.

While this will entail substantial capital expenditure (capex), the risks associated will be lower because a sizeable proportion is brownfield and majority of the expansion will be funded from healthy operating cashflows. Consequently, the financial leverage of cement makers, as measured by the net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio, will be steady and keep credit profiles stable.

Our analysis of 17 cement makers, accounting for ~85% of the 668 MT installed capacity as on March 31, 2025, indicates as much.

In the past three fiscals, cement saw robust demand, with volume clocking a compound annual growth rate (CAGR) of 9.5%, driven by key segments such as infrastructure and housing. As a result, capacity utilisation increased to ~70% last fiscal, compared with a decadal average of 65%.

Says Anand Kulkarni, Director, Crisil Ratings, “Over fiscals 2026-2028, the cement makers are expected to see healthy incremental demand of 30-40 MT annually, prompting a strong growth in capacities. The distribution of incremental capacities may not be linear though. For instance, this fiscal is likely to see commissioning of 70-75 MT, which could moderate capacity utilisation in the near term. All the same, over the three fiscals, demand is expected to be commensurate with supply addition bringing utilisation back to ~70%.”

To be sure, while capacity addition is sizeable, the associated risks are partly mitigated by the fact that ~65% of the addition will be undertaken via brownfield projects, which entail a shorter construction period and limited land acquisition requirement resulting in lower capital cost and fewer implementation challenges.

Additionally, two-thirds of the incremental capacity will be in the form of split grinding units, which are separate cement grinding plants located away from the main clinker production facility. The grinding units typically have lower complexity compared with clinker plants, resulting in lower capex and shorter gestation periods of 1-2 years, compared with 3-4 years for integrated cement plants. This provides early access to market as well as a reduction in lead distance1 and freight cost due to proximity to consumption regions, thereby resulting in faster paybacks.

Says Parth Shah, Associate Director, Crisil Ratings, “Cement makers are estimated to incur capex of ~Rs 1.2 lakh crore between fiscal 2026 and 2028 - around 50% higher compared with the previous three fiscals-predominantly to fund the capacity additions. Nonetheless, similar to the past, capex intensity2 is expected to remain range-bound at 0.8-0.9 time, ensuring limited reliance on external debt. This will keep credit metrics steady, with net debt to Ebitda expected at ~1.1 times going forward, similar to the average of the past three fiscals.”

Notably, this capex also includes 10-15% outlay towards investments in green energy and cost efficiency improvement projects, which would support profitability.

Also, while comfortable leverage provides headroom to raise debt, players have been prudent and have kept the capex intensity and leverage within limits. This should enable the industry to absorb demand and price volatility.