Cement makers to regain decadal average profitability in FY26: Crisil

Rural housing demand will replace infrastructure segment as the primary demand driver this financial year due to expectations of rise in agricultural income on a likely healthy monsoon

Growing cement demand from the rural housing segment, coupled with a recovery in realisations and stable costs, will lift the operating profitability of cement makers in the ongoing financial year 2026 (FY26) to ~975 to ~1,000 per tonne against ~880 per tonne during the previous year, ratings agency Crisil said.

 

It will also be a notch above the decadal average of ~965 per tonne, Crisil said. The profitability stood at ~880 in FY25.

 

“This fiscal, cement demand will be driven by a 7-8 per cent growth in the rural housing segment, which accounts for a third of the domestic demand. Indeed, rural housing demand will replace the infrastructure segment as the primary demand driver this fiscal owing to expectations of rise in agricultural income on a likely healthy monsoon. Higher disposable income on account of lower interest rates and tax cuts as well as benign inflation will also support rural housing demand,” said Sehul Bhatt, director, Crisil Intelligence.

   

Growth in India’s cement demand is estimated to recover to 6.5-7.5 per cent in FY26 after falling to 5 per cent in FY25. 

 

Healthy accrual and robust balance sheets are estimated to keep the credit profiles of cement makers stable. A Crisil analysis of 17 cement companies, accounting for over 85 per cent of domestic sales volume, indicated as much.

 

In FY25, cement demand hit a soft patch in the first half and reported a tepid growth of 2-3 per cent amid a slowdown in construction activities due to the general elections and erratic monsoon.

 

There was a recovery in the second half, leading to annual demand growth of 5 per cent.

 

Meanwhile, this year, the infrastructure segment, the second-largest contributor to cement demand with about a 30 per cent share, is expected to grow at a relatively slow rate due to lower awarding of national highway projects in the previous two financial years and muted capital outlay growth for railways. 

 

Cement prices witnessed a healthy uptick in Q1 FY26 and are expected to rise 2-4 per cent this financial year after two consecutive years of price lulls.

 

Anand Kulkarni, director, Crisil Ratings, said, “Along with higher demand, a recovery in realisations, amid stable costs, will lift the operating profitability of cement makers to ~975-1,000 per tonne this fiscal against ~880 per tonne last fiscal and the decadal average of ~965 per tonne. Increasing proportion of competitively sourced green energy in the power mix will lead to some savings in power and fuel costs. This will support profitability by offsetting the ~20-30 per tonne rise in raw material prices due to higher cost of limestone, fly ash and slag.”