India's cement industry faces a supply-demand imbalance as capacity additions are expected to outpace demand growth in FY27 and FY28, according to Crisil Ratings. The industry's installed grinding capacity stood at 720-730 million tonnes as of March 2026, with 55 MT added in FY26 and another 115-125 MT expected over FY27-FY28. As reported by Crisil, utilisation could moderate to 68-69% from the current 70%, potentially putting pressure on prices in some regions. The expansion is increasingly concentrated among larger players, with the top five cement companies expected to have combined capacity of 465-470 MTPA in FY26, rising to 580-590 MTPA by FY28, according to Mirae Asset Sharekhan.
Cement companies are making their last-ditch effort to shield themselves from profitability pressures with the September quarter (Q2FY27) at its fag-end. According to Nomura Global Markets Research, average pan-India prices in the trade segment could rise by ₹10 per bag month-on-month to ₹330 in September. However, as reported by Systematix Shares and Stocks (India), the chances that these attempts to raise prices will fail are high. September's volume offtake may be hurt by monsoon-related slowdown in construction activities and non-availability of labour due to festivals in certain regions. In the trade segment, cement is sold through a network of local dealers, usually in 50-kilogram bags, but implementation remains challenging amid muted demand.
In July-August, industry volume growth is estimated at 6-7% year-on-year, according to Motilal Oswal Financial Services. Demand is driven by higher infrastructure spending, while retail/residential construction activity remains more dependent on rainfall and labour availability. According to the Motilal Oswal report dated 7 September, demand growth in September would be aided by a low base, with regional demand trends remaining mixed amid elevated competition. Uneven demand conditions constrain pricing power, which could hamper volume growth for manufacturers with regional exposure. However, geographically diversified companies such as UltraTech Cement, ACC and Ambuja could be better placed to weather these challenges.
Cement spreads, a key leading indicator of industry unitary Ebitda, currently averages at around ₹2,447 per tonne Q2FY27, implying a sequential drop of ₹63 per tonne as pricing conditions don't fully offset elevated fuel costs, said Nomura in an 8 September report. The costs of key fuels, imported petroleum coke and coal, have moderated from the peaks seen after the beginning of the West Asia war, but their impact on earnings is reflected with a lag. Near-term profitability is likely to remain under pressure from ₹70–150 per tonne of incremental sequential costs in Q2FY27. While companies are taking cost control initiatives and increasing thrust on the usage of green power to counter fuel price volatility and reduce carbon emission, lack of pricing discipline so far in H1FY27 keeps earnings exposed to risks.
Regional markets face differing impacts from the capacity expansion wave. Equirus Capital expects North, West and Central India to face weaker utilisation over the next two to three years, while demand growth is expected to be relatively stronger in the East and South-East. The North region is set to expand cement capacity by 38% or almost 50 MT over FY25-28, according to Ambit Institutional Equities, potentially putting pressure on established players like Shree Cement. Crisil reports that pan-India average cement prices rose 4-4.5% sequentially in Q1 FY27, helped by partial pass-through of higher fuel, packaging and freight costs. For FY27, prices are expected to rise 1-3% adjusted for lower GST, while elevated input costs could reduce operating margins by ₹50-75 per tonne. However, expectations remain that demand could recover in H2FY27, driven by government-led infrastructure projects and residential realty sector launches.
So far in 2026, stocks of large cement companies have declined more than the 10% fall in benchmark index Nifty50. Valuations have moderated, but unless fundamentals improve, that's not enticing enough for investors. In Q1FY27 earnings call, managements of companies said they are upbeat on FY27 demand prospects, but weak agricultural incomes due to a below-average monsoon may hurt rural housing demand. The lack of pricing discipline so far in H1FY27 keeps companies' earnings exposed to risks, despite their efforts to counter fuel price volatility through various cost control measures. Industry confidence remains strong, with Nuvoco Vistas MD stating that expansion plans reflect long-term confidence rather than short-term fluctuations, while UltraTech Cement CFO noted that demand remains strong but capacity constraints exist.
