Cement Industry Poised for Growth Amid Consolidation

The cement sector experienced modest growth due to a construction slowdown during the Lok Sabha polls. However, it is predicted to expand 7-8% in FY2024-25 due to demand from infrastructure and housing. Government projects and industrial capex will boost volumes in H2 FY2025. Consolidation and organic growth are also expected.

The cement sector has recorded a muted growth of 2-3% in the first quarter of the current fiscal year, attributed to a slowdown in construction activities due to the Lok Sabha polls, according to a report from rating agency Icra.

Nevertheless, the overall volumes for FY2024-25 are projected to rise by 7-8%, driven by robust demand from infrastructure and housing.

Government focus on infrastructure projects, the sanction of additional houses under the Pradhan Mantri Awas Yojana (PMAY), and industrial capex are expected to significantly enhance cement volume offtake in H2 FY2025, the report states.

The report also anticipates further consolidation in the cement industry by key players to boost capacity. Leading players such as Aditya Birla group's UltraTech Cement and Adani group's Ambuja Cements have already initiated consolidation.

Concurrently, the sector is expected to maintain organic growth in the medium term as manufacturers continue to invest in expanding capacity. As per Icra, market share of the top five cement companies increased to 54% in March 2024 from 45% in March 2015, and is projected to rise further to 58-59% by March 2026.

This anticipated consolidation is likely to improve operating profit by 1-3% due to softened raw material prices and sustained cement prices, resulting in an improvement in OPBITDA/MT by 1-3% YoY to Rs 975-1,000/MT, according to Anupama Reddy, Icra Corporate Ratings VP and Co-Group Head.

Additionally, the report forecasts an increase in green power usage to 40-42% of the total power mix by March 2025 from 35% in March 2023, as major cement players aim to lower emissions by 15-17% over the next decade by increasing the share of blended cement and green power consumption through a mix of solar, wind, and waste heat recovery systems (WHRS).

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)