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Demand recovery to help Cement makers to reclaim decadal average profitability this fiscal: Crisil
Jul-08-2025

The rating agency Crisil in its latest report estimated that India’s cement demand growth to recover to 6.5%-7.5% this fiscal (2025-2026), after falling to around 5% last fiscal (2024-2025). It added that the recovery in demand growth coupled with an uptick in realizations will lift operating profitability by around Rs 100, to a level just above the decadal average. According to Crisil, this fiscal, cement demand will be driven by a 7-8% growth in the rural housing segment, which accounts for a third of the domestic demand. It also expects rural housing demand to replace infrastructure segment as the primary demand driver this fiscal, on the back of expectations of rise in agricultural income on likely healthy monsoon. Further, higher disposable income on account of lower interest rates and tax cuts as well as benign inflation are expected to support rural housing demand. The infrastructure segment, the second-largest contributor to cement demand with around 30% share, is expected to grow at a relatively slower pace due to lower awarding of national highway projects in the previous two fiscals and muted capital outlay growth for railways.

Crisil noted that cement prices witnessed healthy uptick in the first quarter of the current fiscal and are expected to rise 2%-4% this fiscal after two consecutive years of price lull. It estimates that the operating profitability of cement makers to rise to Rs 975 - Rs 1,000 per tonne this fiscal compared to around Rs 880 per tonne last fiscal and the decadal average of around Rs 965 per tonne, led by healthy demand, improved realisations amid stable costs. Increasing proportion of competitively sourced green energy in the power mix are expected to boost some savings in power and fuel costs. This will support profitability by offsetting the Rs 20 - Rs 30 per tonne rise in raw material prices due to higher cost of limestone, fly ash and slag.

Moreover, the resultant increase in cash accrual will reduce reliance on external borrowings to fund capital expenditure. Subsequently, 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. Further, it added, an extended monsoon impacting construction activity or lower infrastructure spend, which can affect demand, and any adverse movement in commodity and energy prices owing to global geopolitical tensions, which may dent profitability, will need to be watched closely.

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