India's Cement Demand Rebounds Amid Rising Rural Housing and Firm Prices

India's cement demand is positioned for a rebound, projected to grow between 6.5 and 7.5 percent in the fiscal year 2025-26, according to a recent report by Crisil Ratings. This follows a subdued growth of 5 percent in the 2024-25 period. The forecast improvement, coupled with better realizations, is expected to boost operating profitability just above the decade average, the agency noted.

A study of 17 cement companies by Crisil, representing over 85 percent of domestic sales, reveals stable credit profiles amid healthy accruals and robust balance sheets. The previous fiscal saw a sluggish start due to election-related slowdowns and inconsistent monsoons, with a second-half resurgence leading to 5 percent annual growth. Director of Crisil Intelligence, Sehul Bhatt, emphasized that rural housing will be the key growth driver this fiscal, with expectations of rising agricultural income and improved rural disposable income.

Meanwhile, cement prices showed a healthy rise in the first quarter and are predicted to increase by 2-4 percent this fiscal after years of stagnation. Anand Kulkarni, Director at Crisil Ratings, highlights that alongside demand recovery, stable costs will enhance profitability to Rs 975-1,000 per tonne. Increased use of cost-effective green energy could further offset raw material price hikes. Potential risk factors include adverse weather patterns and geopolitical events that might impact demand and profitability adversely.