India, apart from being one of the fastest-growing economies, is also the second-largest cement producer globally.

Demand is fuelled by the thriving housing sector (accounting for 60-65% of cement consumption) and continued investments in infrastructure.

Indian cement makers have added substantial capacity — 217 MT — from fiscals 2013 to 2022. In the five fiscals through 2017, around 108 MT were added, and while in the next five fiscals through 2022, 109 MT were added despite pandemic-induced disruptions.

On the balance-sheet side, healthy post-pandemic demand recovery and strong profitability helped producers deleverage.

Capex plans, which were on hold or delayed due to the pandemic, restarted in the latter half of fiscal 2021. Then fiscal 2022 saw the highest capacity addition of the preceding decade at 34 MT. That took India’s total installed capacity for cement by ~61% to ~570 MT from 353 MT in fiscal 2012.

In fiscal 2023, capacity addition is expected to moderate to 30-32 MT (inclusive of grinding and integrated units). Higher input costs have impacted the industry’s profitability, thereby slowing capex. In fiscal 2024 as well, capacity addition should flatline at 30-32 MT. That is because policies may change because of general elections.

Once the battle of hustings is over, we expect capacity additions to gather pace, supported by the rising demand amid a growing population and the government’s infrastructure thrust.

Cement companies are expected to go on an expansion spree, and add 145-155 MT of capacity between fiscals 2023 and 2027. That translates to 4-5% compound annual growth rate (CAGR) on a high base.

A robust 6-7% CAGR expected in cement demand over this five fiscals will encourage the growth in supply. Many producers have been unveiling long-term capacity growth plans in an effort to capture market share despite near-term cost headwinds.