Cement industry to record 9% volume growth in FY26: Crisil Intelligence

Indian cement industry's volume is likely to grow by 8-9% in the second half of FY26, led by pent-up demand and better liquidity, Crisil Intelligence said in a report.

It also expects the industry's margins to grow by 250-300 bps, helped by various factors, including higher realisation, stable cost, GST cut, premiumisation, and volume growth, which will ease pressure for manufacturers.

"Improved realisations driven by volume and premiumisation amid steady selling prices and cost of inputs will lead to a 250-300 basis points (bps) growth in the profitability of cement manufacturers this fiscal," the report said.

The report also expects an overall higher growth of 6.5 to 7.5% this fiscal against around 5% in the previous fiscal.

"In the first half of this fiscal, volume grew a moderate 5% on-year, rebounding after flatlining in the same period last fiscal. In the second half of this fiscal, volume is seen rising 8-9% on-year, fuelled by pent-up demand from the first half and better liquidity," it said.

The report also said that average Pan-India cement prices are expected to remain range-bound at ₹354-359 per 50 kg bag.

"The reduction in the goods and services tax (GST) rate from 28% to 18% will exert downward pressure on retail prices. However, premiumisation will offset the pressure and, together with higher demand, aid an improvement in realisations for the manufacturers," it added.

Excluding GST, cement prices are estimated to rise 3-4% year-on-year in the coming quarter.

"However, the reduction in GST is expected to lead to a decline in overall prices," it noted.

The report is based on an analysis of 14 major cement manufacturers, which account for 85% of the industry’s revenue.

"The 14 manufacturers saw a 5% increase in realisations in the first half of this fiscal. The momentum is expected to slow in the second half, with realisations growing a modest 0-2%. Consequently, the full-year average improvement is expected to be 2.5-3.5%," he said.

In terms of regions, healthy demand prospects and a low base are expected to support price recovery in the east and south, leading to prices inching up 0-2% in those geographies this fiscal, after declining 12% and 7%, respectively, last fiscal.

"Prices in the other regions, however, are expected to dwindle 2-3%," it said.

Meanwhile, on the cost side, power and freight costs, which together comprise 54-55% of the total expenses, are projected to fall 2-3% and 1-2%, respectively, this fiscal.

"Raw material costs are likely to remain elevated because of higher limestone prices. However, overall costs are expected to be stable, resulting in an expansion in operating margin to 18-20%t from 16% last fiscal," it said.