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Indian Cement Makers Invest Rs 1.25 Lakh Cr to Meet Demand

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By Rediff Money Desk, New Delhi   Aug 22, 2024 16:59

Indian cement companies to invest Rs 1.25 lakh crore in next two years to meet growing demand, adding 130 million tonnes of grinding capacity.
Indian Cement Makers Invest Rs 1.25 Lakh Cr to Meet Demand
Photograph: Rupak De Chowdhuri/Reuters
New Delhi, Aug 22 (PTI) The Indian cement industry has lined up a capex of around Rs 1.25 lakh crore for FY25 to FY27 to meet the growing demand, said a report by rating agency CRISIL.

During this period, the industry is expected to add 130 million tonne of cement grinding capacity, which is a fifth of the existing capacity.

The investment will be driven by healthy demand outlook and the quest for market share, and the low capex intensity and strong balance sheets will keep the credit profiles of the companies stable, the report said.

"The projected outlay will be 1.8 times the capex during the past three fiscals, yet the 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 1x on the back of strong profitability," it said.

A healthy 10 per cent annualised increase in cement demand in the past three fiscals outpaced growth in capacity addition, pushing the utilisation level to a decadal high of 70 per cent in FY24.

This has prompted the cement manufacturers "to press the capex pedal," it added.

Over the credit profiles, the report said CRISIL Ratings-rated cement manufacturers will remain stable "because capex intensity of the cement industry is still low and likely to remain range-bound at 0.7-0.9 time during fiscal 2025-2027", which is similar to that in the past three fiscals.

The findings are based on an analysis of 20 cement makers, accounting for over 80 per cent of the industry's installed cement grinding capacity as of March 31, 2024, it added.

“Cement demand outlook remains healthy with a compound annual growth rate of 7 per cent over fiscals 2025-2029. The surge in capex over the next three fiscals will primarily cater to this growing demand as well as to the aspirations of the cement makers to improve their national presence," said CRISIL Ratings Senior Director and Deputy Chief Ratings Officer Manish Gupta.

According to the Cement Manufacturers' Association (CMA), all India installed cement capacity is 670 MT.

The industry is led by Aditya Birla group firm UltraTech, whose installed capacity has crossed 150 MT and through ongoing capacity expansion and acquisition, it expects to cross 200 MT per annum.

The Gautam Adani-led Adani Group is the second largest player and has a target to achieve a 140 MTPA capacity by FY28.

Through its Ambuja Cements, it also owns ACC, Sanghi Industries and MyHome Industries and had recently announced the acquisition of Hyderabad-based Penna Cement at an enterprise value of Rs 10,422 crore, which will add 14 MTPA, taking its capacity to 93 MTPA.

Besides, other cement makers such as Shree Cement, Dalmia Bharat, JK Cement have announced expansion.

The cement sector is witnessing consolidation and the top five players - UltraTech Cement, Shree Cement, Ambuja Cement (including ACC Ltd), Dalmia Bharath and Nuvoco Vistas - accounted for approximately 54 per cent of the total market share in FY24.
Source: PTI
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