Advantage India
Robust
Demand
* The cement sector saw a modest growth of 2-3% in Q1 FY25, primarily due to a slowdown in construction during the Lok Sabha elections. However, ICRA projects a 7-8% growth for FY 2024-25, driven by strong demand in infrastructure and housing. .
* UltraTech Cement projects a 7-8% growth in cement demand for FY25, driven by increased construction activities, leading to a rise in industry capacity utilization to 72% and the addition of 35-40 million tonnes of capacity, primarily in eastern and southern India.
Attractive
Opportunities
* The Mumbai-Ahmedabad Bullet Train Corridor is significantly boosting the cement and construction industry, utilizing around 20,000 cubic meters of cement daily-equivalent to eight 10-story buildings. This project, spanning 508 km with multiple stations and tunnels, has generated substantial employment, with about 20,000 workers engaged daily.
Long-term
Potential
* Oligopoly market, where large players have partial pricing control.
* Low threat from substitutes.
* Indian cement companies are amongst the world’s greenest cement manufacturers.
*India's top four cement companies- UltraTech, ACC-Ambuja, Shree Cement, and Dalmia Cement-are set to add over 42 million tonnes of capacity in FY25, increasing their market share from 48% in FY23 to an expected 54% by FY26.
Increasing
Investments
* FDI inflows in the industry, related to the manufacturing of cement and gypsum products, reached US$ 7.91 billion between April 2000-June 2024.
* National Infrastructure Pipeline (NIP) introduced projects worth US$ 14.59 billion (Rs. 102 lakh crore) for the next five years.
Introduction
India is the second-largest producer of cement in the world. It accounts for more than 8% of the global installed capacity. India has a lot of potential for development in the infrastructure and construction sector and the cement sector is expected to largely benefit from it. Furthermore, on the back of rising rural housing demand, the consumption of cement in India has been growing consistently as it is one of the cheapest products to buy in terms of Rs./kg. Strong expansion of the industrial sector, which has fully recovered from the COVID-19 pandemic shock, is one of the main demand drivers for the cement industry. As a result, there is a strong potential for an increase in the long-term demand for the cement industry. Some of the recent initiatives, such as the development of 98 smart cities, are expected to significantly boost the sector.
Aided by suitable Government foreign policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, and Vicat have invested in the country in the recent past. A significant factor which aids the growth of this sector is the ready availability of raw materials for making cement, such as limestone and coal.
Market Size
In 2023, the market size of India’s cement industry reached 3.96 billion tonnes and is expected to touch 5.99 billion tonnes by 2032, exhibiting a CAGR of 4.7% during 2024-32. As India has a high quantity and quality of limestone deposits throughout the country, the cement industry promises huge potential for growth. India has a total of 210 large cement plants, of which 77 are in Andhra Pradesh, Rajasthan, and Tamil Nadu. Nearly 32% of India's cement production capacity is based in South India, 20% in North India, 13% in Central, 15% in West India, and the remaining 20% is based in East India. India's cement production reached 374.55 million tonnes in FY23, a growth rate of 6.83% year-on-year (YoY).
The cement sector saw a modest growth of 2-3% in Q1 FY25, primarily due to a slowdown in construction during the Lok Sabha elections. However, ICRA projects a 7-8% growth for FY 2024-25, driven by strong demand in infrastructure and housing.
Between FY12 and FY23, the installed capacity grew by 61% to 570 MT from 353 in FY22. The Indian cement sector's capacity is expected to expand at a compound annual growth rate (CAGR) of 4-5% over the four-year period up to the end of FY27. It would thus begin the 2028 financial year at 715-725 MT/ year in installed capacity.
India’s cement production for FY24 is expected to grow by 7-8% driven by infrastructure-led investment and mass residential projects.
Ultratech Cement predicts an 8% rise in cement demand, driven by increased construction activities, government spending on infrastructure, and ongoing residential projects across India.
The Indian cement industry is proceeding with expansion plans and capacity additions, despite dampened demand expected to persist through the first half of FY25. Cement giants foresee a modest 6-7% volume growth this fiscal year, even though the period has begun with a pricing downturn.
Indian cement demand is projected to grow by 6-7% in FY25, following a strong 7-8% YoY growth in the last quarter of FY24. Despite a pricing downturn due to increased competition, average cement prices declined by around 1.5% in FY24.
As of April 2024, the installed capacity of cement in India is 553 MTPA with a production of 298 MTPA.
The Mumbai-Ahmedabad Bullet Train Corridor is significantly boosting the cement and construction industry, utilizing around 20,000 cubic meters of cement daily-equivalent to eight 10-story buildings. This project, spanning 508 km with multiple stations and tunnels, has generated substantial employment, with about 20,000 workers engaged daily.
The consumption of cement in India is expected to grow at a CAGR of 5.68% from FY16 to FY22. India's cement industry, as per CRISIL Ratings, plans to increase its capacity by 150-160 MT between FY25 and FY28, building upon the 119 MT annual capacity addition over the last five years, to cater to growing infrastructure and housing demands.
Cement consumption is expected to reach 450.78 million tonnes by the end of FY27.
Investments
- Ramco Cements proposed a Rs. 1,403 crore (US$ 168 million) capacity expansion, including a Rs. 1,250 crore (US$ 149 million) investment to double the capacity at its Kalavatala plant in Andhra Pradesh and an additional Rs. 153 crore (US$ 18.34 million) for a 10 MW waste heat recovery system in Tamil Nadu; the expansion aims to increase clinker capacity to 6.3 MTPA and cement capacity to 3 MTPA, with the total installed capacity reaching 19 MTPA for clinker and 26 MTPA for cement by FY26.
- Ambuja Cements aims to increase its production capacity from 100 million tonnes per annum (MTPA ) to 140 MTPA by FY28, positioning itself aggressively in the competitive cement market.
- Bihar Chief Minister Mr. Nitish Kumar laid the foundation for a Rs. 1,600 crore (US$ 191 million) cement grinding unit by Ambuja Concrete in Nawada. The 6 MTPA project will create 250 direct and 1,000 indirect jobs, with the first phase expected by December 2025.
- UltraTech Cement will deploy 500 electric trucks and 1,000 LNG/CNG vehicles by June 2025, cutting transport-related carbon emissions by 680 tonnes annually. Currently, it operates over 390 CNG and 50 LNG trucks. UltraTech aims to increase its green energy usage to 85% by 2030 and expand its production capacity to 200 million tonnes.
- Shree Cement plans to invest Rs. 2,000 crore (US$ 240 million) to expand its cement production capacity in Uttar Pradesh by nearly 7 million tonnes annually over the next 24 months. The expansion includes new 3.5 MTPA facilities in Etah and Prayagraj, initiated under an MoU with the state government.
- Ramco Cements Ltd proposes a Rs. 1403 crore (US$ 168 million) investment to double capacity at its Kalavatala plant in Andhra Pradesh and set up a 10 MW waste heat recovery system at its Ramasamy Raja Nagar plant in Tamil Nadu, aiming for a total installed capacity of 19 MTPA for clinker and 26 MTPA for cement by FY26.
- UltraTech Cement allocates Rs. 32,400 crore (US$ 3.89 billion) for capital expenditure over the next three years, aiming to increase capacity to 200 MTPA; recent commissioning of two greenfield projects adds 5.4 MTPA, with ongoing expansions set to bring total capacity to 198.2 MTPA, supporting India's robust growth trajectory in the cement sector.
- FDI inflows in the industry, related to the manufacturing of cement and gypsum products, reached US$ 6.10 billion between April 2000-December 2023.
- JSW Group initiates IPO process for JSW Cement, aiming to raise Rs. 6,000 crore (~US$ 723 million), potentially the largest in the sector, with an array of bankers enlisted. Plans include diluting 10-15% stake, with further dilution over two years for capacity expansion to 60 MTPA.
- Shree Cement announces US$ 844 million (Rs. 7,000 crore) investment for 12 million tonnes capacity expansion in India, including clinker manufacturing plants in Rajasthan and Karnataka, along with cement plants in Rajasthan, Uttar Pradesh, and Karnataka by March 2025 .
- UltraTech Cement Limited pledged Rs. 1,000 crore (US$ 120.3 million), while Star Cement committed Rs. 650 crore (US$ 78.3 million) on the inaugural day, December 13, of the Bihar Business Connect-2023 Global Investors Summit at Gyan Bhawan, Patna. 15 prominent companies in general manufacturing also signed Memorandums of Understandings.
- In 2023, infrastructure emerged as the top sector, attracting US$ 11.6 billion across 57 deals, marking a 29% year-on-year growth (compared to US$ 9 billion across 75 deals in 2022), representing the second-highest investment level ever in PE/VC.
- Real estate followed closely as the second-largest sector in 2023, witnessing a record-high of US$ 8 billion across 55 deals, reflecting a 15% increase year-on-year (compared to US$ 6.9 billion across 95 deals in 2022), marking the highest-ever value of PE/VC investments in this sector.
- In October 2023, the real estate sector received the second-highest PE/VC investments at US$ 601 million across six deals.
- In December 2023, UltraTech Cement concluded an agreement to acquire Kesoram Cement from Kesoram Industries for US$ 912 million.
- In November 2023, ACC received a renewed licence for its Rajasthan limestone mine, allowing it to increase its extraction of limestone there to 1.5 million tonnes per year.
- In October 2023, UltraTech Cement announced planned new capital expenditure (CAPEX) investments worth US$ 1.56 billion to grow its production capacity, beginning in the 2026 financial year.
- In October 2023, Dalmia Bharat announced a planned investment of US$ 10.9 million in a grinding unit expansion at its 1 million tonnes/year Banjari cement plant in Bihar.
- In April 2023, the infrastructure and real estate asset class recorded US$ 3 billion in PE/VC investments, an 82% increase YoY and a 3% increase over March 2023.
- An MoU was signed between Star Cement Limited and the Government of Assam for an investment worth Rs. 1,400 crore (US$ 170.9 million) for setting up a Cement Grinding unit in Guwahati and another Cement Grinding unit in Cachar and AEC Block and other construction manufacturing units in Guwahati.
- Ramco Cements is planning to invest a total of US$ 91.3 million towards growing its capacity in FY24. Its planned investments consist of US$ 15.8 million in an expansion to its Haridaspur grinding plant in Odisha and US$ 75.5 million in the acquisition of land in Bommanalli, Karnataka, on which to establish a limestone mine.
- Dalmia Cement (Bharat) is planning to invest US$ 560 million following the signing of a memorandum of understanding (MoU) with the Assam government on the construction of a new cement plant in the state.
- The real estate sector received the highest value of PE/VC investments in Q1 (January-March) of 2023 at US$ 5 billion, registering a year-over-year 123% growth.
- In 2022, PE/VC investments in real estate and infrastructure stood at US$ 5.81 billion across 71 deals and US$ 7.9 billion across 47 deals respectively.
- PE/VC investments in real estate and infrastructure witnessed a sharp growth of 27%, at US$ 13.7 billion in December 2022 as compared to US$ 10.7 billion in December 2021.
- India’s export of panel cement, clinkers, and asbestos cement products stood at US$ 682.32 million in FY23 while the imports were US$ 288.42 million.
- As per DGCIS, India’s export of Portland cement, aluminous cement, slag cement, super sulphate cement and similar hydraulic cement stood at US$ 118.15 million in FY21.
- In 2021, working remotely is being adopted at a fast pace and demand for affordable houses with ticket sizes below Rs. 40-50 lakh (US$ 53,694-67,118) is expected to rise in Tier 2 and 3 cities, leading to an increase in demand of cement.
Some of the major investments and developments in the Indian cement industry are as follows:
- In June 2024, Ambuja Cement signed an agreement to acquire Penna Cement for Rs. 10,422 crore (US$ 1,24 billion), a move expected to boost Adani Group's production capacity to over 140 million tonnes per annum (MTPA) by 2028. This acquisition will add 14 MTPA of production capacity, providing Ambuja Cement with an additional 3 million tonnes of clinker and 4 million tonnes of cement capacity. The deal is anticipated to enhance Ambuja's market share in South India by 8-15% and provide entry into the Sri Lankan market, while also allowing for further inorganic growth opportunities.
- In July 2023, Shree Cement Ltd announced the commencement of commercial production at its clinker grinding unit in the Purulia district of West Bengal which has an annual cement capacity of 3 MT.
- In June 2023, JSW Cement entered an agreement for a Sustainability Linked Loan (SLL) with BNP Paribas, to secure approximately Rs. 414 crore (US$ 50 million). The capital raised through this agreement will be utilised by JSW Cement to support its capacity expansions, aligning with its long-term objective of achieving a cement-making capacity of 50 MTPA in India.
- In May 2023, ACC launched Bagcrete, a hassle-free and user-friendly concrete solution for all types of construction demands, which is a pre-blended mixture of cement, sand, and aggregates.
- In May 2023, Adani Group-owned ACC and Ambuja Cements launched a modern Cement and Concrete R&D facility at Kalamboli on the outskirts of Mumbai.
- In May 2023, Dalmia Cement (Bharat) launched Dalmia Supreme cement, a Portland Pozzolana Cement (PPC), in the Eastern India market.
- In April 2023, Dalmia Bharat's wholly-owned material subsidiary-Dalmia Cement (Bharat) commenced commercial production at its second cement line at its Bokaro, Jharkhand Cement Works 2 (JCW2).
- In April 2023, UltraTech Cement commissioned an upgrade to its grinding plant at Patliputra in Bihar. The 2.2 million tonnes (MT) per year upgrade brings the total capacity of the unit to 4.7 MT per year.
- Ambuja Cements' parent company-Adani Group has said that the cement producer aims to more than double its sales to US$ 8.5 billion in 2028. Ambuja Cements currently was expecting to record sales of US$ 3.61 billion in 2023.
- Dalmia Bharat plans to expand its footprint in Central, Northern, and Western India through capital expenditure investments, in order to reach a pan-India cement capacity of 54 MT/year by the end of FY24.
- In December 2022, UltraTech Cement completed a greenfield grinding capacity at the Dhule Grinding unit in Maharashtra with a capability of 1.8 million tonnes per annum (MTPA).
- In December 2022, UltraTech Cement commissioned a second grinding capacity with a brownfield clinker of 1.8 MPTA capacity at Dhar Cement Works in Madhya Pradesh.
- In September 2022, a 6.7 Mega Watts ground-mounted solar project was completed by Shree Cement Group in Haryana.
- In August 2022, an integrated cement unit of 3 million tonnes capacity is being set up in Andhra Pradesh. The project is estimated to be completed by Q2 of FY 2024-25.
- Ametha Integrated Unit will be set to be commissioned by July 2023, which is expected to increase cement capacity by 3.3 MTPA.
- In June 2022, UltraTech Cement approved Rs. 12,886 crore (US$ 1.65 billion) capital expenditure to increase capacity by 22.6 million tonnes per annum (MTPA) through brownfield and greenfield projects.
- PE/VC investments in real estate and infrastructure stood at US$ 338 million and US$ 795 million respectively in September 2022.
- Cement production in India increased by 12.1% in September 2022 compared to September 2021.
- In October 2022, UltraTech announced that it has been granted Environmental Product Declaration (EPD) certificates for four of its cement products, which are Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Slag Cement (PSC) and PCC (Portland Composite Cement).
- In May 2022, Adani Group acquired a 63.1% stake in Ambuja Cements Ltd along with related assets. Ambuja's local subsidiaries include ACC Ltd, which is also publicly traded.
- In February 2022, ACC Limited, announced the successful commissioning of a 1.6 MTPA Grinding Unit (GU) at Tikaria in Uttar Pradesh.
- In November 2021, UltraTech Cement announced its commitment to the Global Cement and Concrete Association (GCCA) 2050 Cement and Concrete Industry Roadmap to produce carbon-neutral concrete by 2050.
- In November 2021, Dalmia Cement announced plans to produce 100% low-carbon cement by 2031. The company has a US$ 405-million Carbon Capture and Utilisation (CCU) investment plan to help it realise its goal.
- Dalmia Cement plans to spend US$ 1.35 billion to increase its installed cement capacity by 52% to 50MT/yr from 33MT/yr before FY2024.
- In November 2021, Dalmia Cement announced plans to invest US$ 70.1 million for setting up its upcoming 2MT/yr cement plant in Bokaro, Jharkhand.
- In October 2021, JK Cement Ltd. signed a long-term strategic Memorandum of Understanding (MoU) with Punjab Renewable Energy Systems Private Limited (PRESPL). The MoU is part of JK Cement’s attempts to decarbonize its operations and significantly scale up the use of biomass-based and alternate fuels as replacements to fossil fuels, like coal, in its manufacturing operations.
- In October 2021, JSW Group collaborated with Salesforce to support an ambitious digital strategy. Using Salesforce’s Sales Cloud and Service Cloud, JSW Group will offer a single group interface, enhancing distribution, customer experience and supply chain for the large project division across its steel and cement businesses.
- In October 2021, Hyderabad-based Penna Cement Industries, received approval from the capital markets regulator Securities and Exchange Board of India (SEBI), to go ahead with its Rs. 1,550 crore (US$ 206.75 million) Initial Public Offering (IPO).
- In September 2021, Ambuja Cement launched ‘Concrete Futures Laboratory’, a one-stop solution that will enable budding professionals to test, learn and experience various aspects of cement and concrete.
- In September 2021, the Odisha government approved the Ramco Cements expansion plan with an additional grinding capacity of 0.9 MTPA capacity at Haridaspur in Jajpur with an investment value of Rs. 190 crore (US$ 25.5 million).
Government Initiatives
In order to help private sector companies thrive in the industry, the Government has been approving their investment schemes. Some of the initiatives taken by the Government of late are as below:
- As per the Union Budget 2024-25, the government approved an outlay of Rs. 2.78 lakh crore (US$ 33.33 billion) for the Ministry of Road Transport and Highways.
- In the Union Budget 2024-25, an outlay of Rs. 80,671 crore (US$ 9.63 billion) was allotted under the Pradhan Mantri Awas Yojana.
- As per the Union Budget 2024-25:
- The government approved an outlay of US$ 33.20 billion (Rs. 2.78 lakh crore) for the Ministry of Road Transport and Highways which is likely to boost demand for cement.
- As per Invest India, the National Infrastructure Pipeline (NIP) expanded to 9,305 projects from 7,400 projects.
- Government schemes like the Pradhan Mantri Awas Yojana (PMAY) for affordable housing and PM Gati Shakti National Master Plan for infrastructure are driving cement demand. PM Gati Shakti's focus on transport networks and PMAY's expansion will further increase cement consumption in coming years.
- In October 2021, Prime Minister, Mr. Narendra Modi, launched the ‘PM Gati Shakti - National Master Plan (NMP)’ for multimodal connectivity. Gati Shakti will bring synergy to create a world-class, seamless multimodal transport network in India. This will boost the demand for cement in the future.
- The Union Budget allocated Rs. 13,750 crore (US$ 1.88 billion) and Rs. 12,294 crore (US$ 1.68 billion) for Urban Rejuvenation Mission: AMRUT and Smart Cities Mission and Swachh Bharat Mission.
Road Ahead
The Indian government is firmly focused on infrastructure development to spur economic growth and is striving for full infrastructure coverage to establish smart cities. The government plans to increase the capacity of railways and the facilities for handling and storage to enable the transfer of cement and cut out on transportation costs. These measures are expected to result in increased construction activity in the country, thereby boosting demand for cement.
The eastern states of India are likely to be the newer and untapped markets for cement companies and could contribute to their bottom line in future. In the next 10 years, India could become the main exporter of clinker and grey cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well-armed to face stiff competition from cement plants in the interior of the country. India's cement production capacity is expected to reach 550 MT by 2025. A number of foreign players are also expected to enter the cement sector owing to the profit margins and steady demand.
References: Media Reports, Press releases, Union Budget 2023-24, Edelweiss Securities Ltd., Global Cement
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