Cement demand to grow 10-12% this fiscal on offtake from infrastructure segment, says CRISIL

According to a CRISIL Ratings report, India's cement demand will increase 10-12% annually to 440 million tonnes (MT) in FY24, continuing the trend shown over the previous two fiscals. According to the research, the infrastructure area would have a robust offtake that will fuel this rise.

The operating profit of manufacturers is also anticipated to increase by Rs. 200 (US$ 2.41) per tonne from a multi-year low of Rs. 770 (US$ 9.29) per tonne last fiscal when combined with steady cement prices and softening power and fuel costs. It was stated that the increase in demand and margin recovery would encourage cash accrual and maintain stable credit profiles. In order to arrive at its findings, CRISIL Ratings examined 21 cement manufacturers, which together account for 90% of domestic sales volume.

Government spending on infrastructure development, which makes up 30% of yearly cement sales, will, according to the report, drive demand.

In addition, stable expansion is anticipated in the housing sector, which accounts for around 55% of cement demand, due to strong momentum in both urban real estate development and rural construction. Demand will also be supported by the government's continued emphasis on affordable housing through the Pradhan Mantri Awas Yojana.

Despite some seasonal slowdown brought on by the monsoon, cement demand growth was indicated to be 13-15% in the first half of this fiscal, driven by a strong first quarter and a healthy second quarter," the report added.

Mr. Koustav Mazumdar, Associate Director of Research, CRISIL Market Intelligence and Analytics, said, “Demand growth may moderate to 7-9% in the second half of this fiscal given the high base and as the central government capital expenditure could witness some slowdown with the general elections approaching.”

Because of the increased demand and the recent retreat in cement prices across India, which had decreased by 2.5% during April-August 2023, this fiscal's revenue growth will be further aided. Petcoke and imported non-coking coal prices have decreased by 35-50% this fiscal year through August compared to the previous fiscal's average. These two fuel sources are essential for producing cement.

According to CRISIL Ratings, the sector's leverage (measured as net debt to EBITDA) and interest coverage will remain in a comfortable range of 1.1-1.2x and 7-8x, respectively, this fiscal, due to the recovery in profitability and cash accrual, which will keep credit profiles stable.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.