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Jun 06

The future is Bright for the Cement Industry in India

Summary: The Indian Cement industry is going through a golden phase of growth.

The future is Bright for the Cement Industry in India
The last decade or so has seen a lot of growth in the outstanding capacity of cement production and consumption in India. We were already known to be one of the largest producers of cement in the world, and the future is only going to make that position stronger.

Market analysts everywhere are predicting a big push up for the cement industry in the later half of this decade.

And looking at the story so far, it seems like the predictions were true. For example, according to the CapEx database of the Centre for Monitoring Indian Economy (CMIE), “an incremental capacity of a huge 68.5 million tonnes per annum (mtpa) is slated for completion during 2015-18”.

A large part of this increase in production capacity (more than 60%) has already been achieved. Since 2015, 40.5 mtpa has been added to India’s capacity. An additional 18.1 mtpa of capacity is in the process of being installed by the end of this fiscal year. The remaining capacity, just shy of 10 mtpa, will come over the next year.

The future is Bright for the Cement Industry in India
Currently, India’s total outstanding capacity for cement is just a little over 400 mtpa. With this new boost, that capacity will be raised to a total of 474 mtpa over the next couple of years. The total investment of these “boost projects” is estimated to be a whopping Rs 27,960 crore, and it involves both the public and private sectors.

In fact, a large part of this push comes because of favorable government policies and the State’s active role in enabling infrastructure growth, thus driving up the demand for cement.

In a report filed by India Ratings and Research, an official noted —

"Demand will be backed by an increase in government expenditure. We expects the credit profile of cement manufacturers to remain stable on stable operating profitability and in the absence of debt-led capex.”

The governments push for Housing (via Pradhan Mantri Gram Sadak Yojna) and Roadways (via Pradhan Mantri Awas Yojana) have been one of the leading generators of cement demand recently.

As reported by the Economics Times, “Nearly 38 per cent and 23 per cent hike in the allocation of funds towards the housing sector and spending of the Ministry of Road Transport and Highways to Rs 290 billion and Rs 649 billion respectively, would increase cement demand in the next fiscal [year].”

A lot of corporates have also stepped up their game to meet the rising demands. UltraTech Cement, for example has finished two projects and on the way to finishing four more by the next year. Operating over Maharastra, Karnataka, Bihar, and Rajasthan, these plants will increase the company’s net outstanding by 12.4 mtpa.

Reliance Cement Co., woking out of Yavatmal, Maharastra, has also added 8.5 mtpa of production capacity over the past three years. They are planning to add 5 mtpa more by adding a new plant in West Bengal.

This growth story is likely to continue into the coming years. The economy of the country is strong, and the policy frame-work favorable. As pointed out by the Economic Times, “the domestic cement industry is expected to grow at 4 to 5 per cent Y-o-Y in FY18”.

Thus, we expect a steady increase in both demand and production over the next couple of years at least.


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