Cement sector to invest Rs 1.25 trillion as capex by FY27: CRISIL

The agency said an analysis of 20 cement makers, accounting for over 80 per cent of the industry's installed cement grinding capacity as of March, indicates the stated capex combined

Indian cement producers are expected to invest Rs 1.25 trillion in capacity building between financial year 2025 (FY25) and FY27, driven by healthy demand outlook and quest for market share, rating agency CRISIL said in a report released Thursday.

CRISIL said the projected capital expenditure (capex) outlay will be 1.8 times the capex during the past three fiscal years, however, they expect that credit risk profiles of manufacturers will remain stable.

“This is owing to their continued low capex intensity and solid balance sheets with financial leverage sustaining below 1 times on the back of strong profitability,” the agency said.

The agency said an analysis of 20 cement makers, accounting for over 80% of the industry’s installed cement grinding capacity as of March, indicates the stated capex combined.

CRISIL also noted that over 80 per cent of the projected capex over the three fiscals through 2027 is likely to be funded through operating cash flows, resulting in minimal requirement of additional debt.

“Moreover, existing cash and liquid investments of over Rs 40,000 crore will provide a cushion in case of implementation-related delays,” said Ankit Kedia, director, CRISIL Ratings

“A healthy Rs 10 per cent annualised increase in cement demand in the past three fiscals outpaced growth in capacity addition, pushing utilisation level to a decadal high of Rs 70 per cent in FY24 and prompting manufacturers to press the capex pedal,” the report said.

For the coming years, Manish Gupta, senior director and deputy chief ratings officer, CRISIL Ratings, expects cement demand outlook to remain healthy with a compound annual growth rate of Rs 7 per cent over FY25-29.

He added, “A total of Rs 130 million tonne (MT) of cement grinding capacity (nearly a fourth of the existing capacity) is likely to be added by players over this period.”