Indian Economy News

Cement sales volume to grow around 10% in FY24 led by demand from infra and urban housing: Report

  • IBEF
  • October 19, 2023

A report indicates that the infrastructure and urban housing sectors would drive a robust 9-10% expansion in cement sales volume during the current fiscal year. According to the report by rating agency Icra, the industry had volume growth of about 12% in the first half of this fiscal year between April-September.

It added that, however, there would be "some moderation in growth in H2" due to below-normal monsoons on the total crop yield, which would negatively affect farm incomes and the demand for rural homes in certain markets.

"Moreover, with the upcoming state elections the release of funds towards ongoing infra projects may slow down, posing some downside risks to cement volume off-take in H2 FY24," it stated.

Nonetheless, it is anticipated that the cement industry's operating margins will improve by 260-310 bps to 16.0-16.5% in FY24.

According to the report, the cement industry's reliance on expensive thermal power and the grid for power requirements is expected to decrease as green power becomes more prominent, which would minimise operational costs.

Further, substituting 25% of thermal power consumption with green power could result in cost savings of roughly 15-18% and reduce carbon emissions. This is assuming that thermal power costs Rs. 6.5/unit, waste heat recovery system (WHRS) power costs Rs. 0.75/unit, and solar power costs Rs. 4.5/unit.

Additionally, it stated that strong demand expectations will help the cement industry maintain its capacity expansion.

The cement industry is expected to add 63-70 million metric tonnes (MMT) of capacity between FY24 and FY25; of that amount, about 33-37 MMT will be added in FY24, marking the largest addition in the previous five years. The expansion is anticipated to be led by the eastern and central areas, according to Icra.

The industry added a total capacity of 27 million metric tonnes per annum (MTPA) in the most recent fiscal year. Furthermore, Cement Manufacturers' Association (CMA) statistics indicated that India has an installed cement capacity of 541 MT.

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