Cement companies plan Rs 1.25 lakh crore capex till FY27: Crisil Ratings

The projected spending is significantly higher than what has been observed in previous years, Crisil said. This is 1.8 times the total capital expenditure over the past three financial years put together, it said. The capex plan follows a spate of acquisitions by leading players like the Aditya Birla group and the Adani Group in the cement sector.

“A healthy 10 per cent annualised increase in cement demand in the past three fiscals outpaced growth in capacity addition, pushing utilisation level to a decadal high of 70 per cent in fiscal 2024 and prompting manufacturers to press the capex pedal,” it said.

Cement demand outlook remains healthy with a compound annual growth rate of 7 per cent over fiscals 2025-2029, the report said.

“The surge in capex over the next three fiscals will primarily cater to this growing demand as well as to the aspirations of the cement makers to improve their national presence,” said Manish Gupta, Senior Director and Deputy Chief Ratings Officer, CRISIL Ratings. “A total of 130 million tonne (MT) of cement grinding capacity (nearly a fourth of the existing capacity) is likely to be added by players over this period,” Gupta said. Over 80 per cent of the projected capex over the three fiscals through 2027 is likely to be funded through operating cash flows, resulting in minimal requirement of additional debt, Crisil said.

Moreover, existing cash and liquid investments of over Rs 40,000 crore will provide a cushion in case of implementation-related delays, Crisil said.

However, regardless of the fact that there is a large injection of capital being spent, Crisil said that they would still be able to maintain stable credit metrics within their respective businesses. This stability is attributed to their stable balance sheets, with businesses in the industry retaining profits for the financial year, Crisil said.

“The credit profiles of CRISIL Ratings-rated cement manufacturers will remain stable because capex intensity of the cement industry is still low and likely to remain range-bound at 0.7-0.9 time during fiscal 2025-2027 (similar to that in the past three fiscals), owing to the sustenance of healthy operating profitability and ramp up of newly commissioned facilities,” the report said.

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