ICRA: Cement volumes to grow by 6-7% in FY2027

According to a report by ICRA, cement volume growth is expected to moderate to 6-7% in FY2027. In FY2026, cement volumes grew by 8.6% YoY backed by demand from the housing and infrastructure sectors. In 2M FY2027, volumes increased by ~8.3% YoY to ~85 million MT.

Net sales realisations (NSR) increased by ~7% YoY in FY2026 and are likely to further increase by around 3-5% in FY2027. Input costs remained largely stable in FY2026. However, fuel and freight costs, which are linked to global crude prices, have been trending upward and could further increase in FY2027 due to volatility depending on geopolitical developments in West Asia, potentially exerting pressure on the sector’s cost structure.

Cement capacity increased by around 43 million MTPA in FY2026 and is expected to further add 30-34 million MTPA in FY2027. Capacity utilisation is expected to remain at 70-71%, broadly in line with ~70% levels seen in FY2026.

Operating margins are expected to moderate by around 150-250 bps in FY2027, driven by higher input costs. Additionally, downside risk remains, given volatility in crude-linked petcoke and freight costs amid ongoing geopolitical developments in West Asia.

ICRA estimates operating income for its sample set to grow by 9-12% in FY2027, supported by volume expansion and a moderate uptick in cement prices. OPBIDTA/MT is likely to decline by 8-14% to Rs. 820-870/MT in FY2027 after rising ~16% to Rs. 950/MT in FY2026.

Despite moderation in profitability and increased debt requirements for the ongoing capex, debt protection metrics are likely to remain comfortable. In FY2027, leverage (TD/OPBIDTA) and debt coverage metrics (DSCR) are estimated at 1.45-1.55x and 3.2-3.4x, respectively.