Leading cement manufacturers project 7-8% volume growth in FY27, underpinned by robust domestic demand fundamentals. The sector recorded 9.2% year-on-year volume growth in the first 11 months of FY26, demonstrating strong momentum.
Housing demand continues to contribute significantly, with affordable housing initiatives (PMAY) and urbanization providing structural support. Rural demand is also showing signs of recovery, adding another layer to the growth story. Transcripts
Rating agency ICRA independently validates this outlook, forecasting 7-8% volume growth for FY27, with total volumes expected to reach approximately 490 million tonnes in FY26. Company-specific projections align with this view: UltraTech Cement targets double-digit growth, Ambuja Cements projects 8% growth to 80 million tonnes, Dalmia Bharat expects 7-8% CAGR, and Shree Cement targets 8-8.5% growth. Transcripts +3
The ongoing geopolitical tensions in West Asia are creating significant cost headwinds for cement manufacturers. Petcoke prices surged 19% month-on-month in April 2026 due to supply disruptions from the Middle East, while diesel prices increased by Rs 3.9/litre in May 2026.
Power and fuel expenses, accounting for 26-28% of total costs, are projected to rise 10-12% year-on-year.
These cost pressures are directly impacting profitability.
Operating margins are projected to fall 150-200 basis points to 16-18%. The timing of margin pressure is concentrated in the first half of FY27, with geopolitical disruptions expected to intensify cost pressures before potential normalization.
Despite these external headwinds, domestic demand recovery is substantially offsetting the challenges. The 9.2% volume growth in 11M FY26 demonstrates strong domestic demand momentum expected to continue into FY27. ICRA projects cement volumes to grow 8-9% to about 490 million MT in FY26 before moderating to 7-8% in FY27.
Capacity utilization is estimated to settle at 70-72% in FY27, similar to the ~72% utilization recorded in FY26. This stable utilization on an expanded capacity base indicates healthy demand absorption. North and Central India are expected to report capacity utilization levels higher than the national average of about 70%, while the southern region may continue to witness relatively moderate utilization due to capacity overhang.
Cement companies are responding to cost pressures through comprehensive internal optimization initiatives. UltraTech Cement achieved total efficiency gains of Rs 93 per ton in FY26 through WHRS expansion to 414 MW, renewable power capacity at 1,392 MW, alternative fuel mix improvement to 7.2%, and lead distance reduction to 367 km. Ambuja Cements is targeting Rs 150-200 per ton reduction in FY27 through green power initiatives (currently at 32.3%), long-term raw material arrangements, and fuel mix optimization. Dalmia Bharat focuses on continuous cost improvement, targeting Rs 50-100 cost takeout annually. InvestorPresentations +4
Premiumization has emerged as a key strategy to improve realizations despite limited pricing power. UltraTech Cement reported grey cement pricing strengthened ~2.5% across most geographies in Q4FY26, supported by premiumization and better trade mix. Dalmia Bharat noted realizations improved ~1.7% QoQ despite appearing flattish, driven by premiumization. Companies are focusing on trade sales and premium cement offerings to enhance value rather than blanket price increases. Transcripts
The top 4 cement companies are adopting markedly different approaches to capacity expansion in response to moderating profitability expectations. UltraTech Cement maintains aggressive expansion with 15.9 MTPA planned for FY27, targeting 212.7 MTPA capacity from 196.8 MTPA, backed by Rs 10,000 crore capex guidance. Management emphasizes that every ton of capacity added reinforces scale advantages in cost efficiency, market reach, and raw material security. InvestorPresentations +2
Ambuja Cements has recalibrated its approach, reducing FY27 capex to Rs 6,000-6,500 crore from Rs 7,500 crore, focusing on completing existing projects rather than new commitments. The company targets improving utilization from 77% to 85% as a primary margin driver. Dalmia Bharat pursues steady expansion toward 61.5 MTPA within 18-20 months with Rs 3,200-3,400 crore capex guidance. Shree Cement has adopted a conservative stance with Rs 1,500 crore FY27 capex, slowing expansion while maintaining strong net cash position of Rs 6,400 crores. Transcripts +5
The strategic decisions on capacity and pricing are creating divergent market positioning. Scale leaders like UltraTech Cement are leveraging unmatched capacity to capture disproportionate share of growth. Efficiency leaders like Dalmia Bharat and Shree Cement are protecting margins through cost optimization and pricing discipline. Synergy players like Ambuja Cements are leveraging Adani Group integration for competitive advantage.
Despite ICRA's forecast of moderating profitability, these competitive advantages enable the top 4 cement stocks to sustain growth while navigating the challenging cost environment. Companies that best balance margin protection with strategic growth investments will emerge stronger when cost pressures normalize. The sector's long-term growth story remains intact, supported by India's infrastructure push and urbanization trends, but near-term profitability will be challenged by elevated energy and logistics costs.
