Cement Sector Growth in India: Trends, Consolidation, and Green Power
The cement sector in India experienced a modest growth of 2-3% in the first quarter of the current fiscal year, primarily due to a slowdown in construction activities during the Lok Sabha elections, as reported by the rating agency ICRA. Despite this, the overall cement sector growth for FY2024-25 is expected to grow by 7-8%, driven by strong demand from the infrastructure and housing sectors.
ICRA’s report highlights that the government’s emphasis on infrastructure projects, additional housing sanctions under the Pradhan Mantri Awas Yojana (PMAY), and industrial capital expenditure are anticipated to significantly boost cement sector growth in the second half of FY2025. The report also forecasts further consolidation in the cement industry, with major players like UltraTech Cement and Ambuja Cements expanding their capacities through both organic and inorganic growth strategies.
The market share of the top five cement companies has significantly increased, rising from 45% in March 2015 to 54% in March 2024. ICRA anticipates this share will further expand to 58-59% by March 2026, reflecting ongoing consolidation within the industry.Additionally, cement companies are expected to see a 1-3% improvement in their operating profit due to reduced raw material costs, particularly in power and fuel.
Cement prices are projected to remain stable, while cost-side pressures are expected to ease, primarily due to a focus on green power. This shift is likely to enhance the operating profit before interest, taxes, depreciation, and amortization per metric ton (OPBITDA/MT) by 1-3% year-over-year, reaching Rs 975-1,000/MT.
The report also emphasizes the increasing role of green power in the cement sector growth. By March 2025, green power is expected to account for 40-42% of the total power mix for major cement companies, up from 35% in March 2023. This shift is part of a broader strategy to reduce emissions by 15-17% over the next 8-10 years. Cement manufacturers are prioritizing the increase of blended cement production, which requires less clinker and fuel. They are also enhancing their green power consumption through solar, wind, and waste heat recovery systems.
In summary, while the cement sector faced challenges in the early part of the fiscal year, the outlook for the remainder of FY2024-25 is positive, driven by government initiatives and a focus on sustainability and efficiency improvements. The cement sector growth is poised to benefit from these strategic moves, ensuring a robust performance in the coming years.
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