India’s cement industry is expected to witness a moderation in volume growth during FY2027, with demand projected to expand by 6-7%, according to a latest report by ICRA Ltd. The outlook follows a robust 8.6% year-on-year volume growth in FY2026, driven primarily by strong demand from the housing and infrastructure sectors.
The report noted that momentum has remained healthy in the current fiscal, with cement volumes rising by approximately 8.3% year-on-year to around 85 million metric tonnes (MT) during the first two months of FY2027.
On the pricing front, net sales realisations (NSR), which increased by nearly 7% in FY2026, are expected to grow by another 3-5% in FY2027, supported by stable demand and a favourable pricing environment.
However, profitability is likely to come under pressure as input costs begin to rise. While input costs remained largely stable during FY2026, fuel and freight expenses—both closely linked to global crude oil prices—have started trending upward. ICRA cautioned that continued geopolitical tensions in West Asia could further increase these costs, impacting the industry’s overall cost structure.
The sector also continues to witness significant capacity expansion. Cement manufacturers added around 43 million tonnes per annum (MTPA) of capacity in FY2026, with another 30-34 MTPA expected to be commissioned during FY2027. Despite these additions, capacity utilisation is projected to remain broadly stable at 70-71%, similar to FY2026 levels.
Reflecting the higher cost environment, ICRA expects the industry’s operating margins to decline by 150-250 basis points in FY2027. The report also highlighted downside risks arising from volatility in crude oil-linked petcoke prices and freight costs amid ongoing geopolitical developments in West Asia.
For its sample set of companies, ICRA estimates operating income to grow by 9-12% in FY2027, supported by healthy volume growth and moderate improvement in cement prices. However, operating profit before interest, depreciation and tax (OPBIDTA) per metric tonne is expected to decline by 8-14% to Rs. 820-870 per MT, after increasing by around 16% to Rs. 950 per MT in FY2026.
Despite the anticipated moderation in profitability and higher debt requirements to fund ongoing capacity expansion, the report expects the industry’s balance sheet to remain resilient. Leverage (TD/OPBIDTA) is projected at 1.45-1.55x, while the Debt Service Coverage Ratio (DSCR) is estimated at 3.2-3.4x in FY2027, indicating comfortable debt servicing capabilities.
Overall, ICRA believes the Indian cement industry will continue to benefit from sustained infrastructure and housing demand, although rising input costs and geopolitical uncertainties are likely to temper profitability in the coming fiscal.